The Nationalist Dilemma: A Global History of Economic Nationalism, 1776–Present 1108831389, 9781108831383

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THE NATIONALIST DILEMMA

Nationalists think about the economy, Marvin Suesse argues, and this thinking matters once nationalists hold political power. Many nationalists seek to limit global exchange, but others prioritise economic development. The potential conflict between these two goals shapes nationalist policymaking. Drawing on historical case studies from thirty countries – from the American Revolution to the rise of China – this book paints a broad panorama of economic nationalism over the past 250 years. It explains why such thinking has become influential, despite the internal contradictions and chequered record of many nationalist policymakers. At the root of economic nationalism’s appeal is its ability to capitalise upon economic inequality, both domestic and international. These inequalities are reinforced by political factors such as empire building, ethnic conflicts and financial crises. This has given rise to powerful nationalist movements that have decisively shaped the global exchange of goods, people and capital. marvin suesse is Assistant Professor in Economics at Trinity College Dublin, specialising in international political economy. He has published on nationalism in the post-Soviet states, regional integration in Eastern Europe, cooperatives in Imperial Germany and state-building in subSaharan Africa.

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Published online by Cambridge University Press

THE NATIONALIST DILEMMA A Global History of Economic Nationalism, 1776–Present

MARVIN SUESSE Trinity College Dublin

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Shaftesbury Road, Cambridge CB2 8EA, United Kingdom One Liberty Plaza, 20th Floor, New York, NY 10006, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia 314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre, New Delhi – 110025, India 103 Penang Road, #05–06/07, Visioncrest Commercial, Singapore 238467 Cambridge University Press is part of Cambridge University Press & Assessment, a department of the University of Cambridge. We share the University’s mission to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781108831383 DOI: 10.1017/9781108917087 © Marvin Suesse 2023 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press & Assessment. First published 2023 Printed in the United Kingdom by TJ Books Limited, Padstow Cornwall A catalogue record for this publication is available from the British Library. A Cataloging-in-Publication data record for this book is available from the Library of Congress. ISBN 978-1-108-83138-3 Hardback Cambridge University Press & Assessment has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.

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For Olga, Mira, Michael and Max

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CONTENTS

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Introduction: Nationalists Think About the Economy 1.1 The Nationalist Dilemma 2 1.2 The Passions and the Interests 7 1.3 Understanding Economic Nationalism

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37

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Introduction 76 Max Weber and the Struggle of Nations 78 Conflict and Cooperation in East-Central Europe 88 Land, Looms and Liberty in India and Ireland 95 Japan, Russia and the Ottoman Empire: List’s Bitter Triumph

The Nationalist as Saviour, 1914–1945 5.1 5.2 5.3 5.4 5.5 5.6

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Introduction 44 Economic Equality and the French Nation 45 Money and Language: The Romantic Reaction 52 List’s Unified Theory of Growth 60 Nations and Empires 69

The Globalisation of the Nation, 1861–1913 4.1 4.2 4.3 4.4 4.5

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Introduction 12 Independence and Integration 14 The Hamiltonian Proposal 19 Nationalism Democratised 25 The American System 31 Henry Carey and the Harmony of Interests

The Birth of the National Economy in Europe, 1789–1860 3.1 3.2 3.3 3.4 3.5

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The American Community of the Common Man, 1776–1860 2.1 2.2 2.3 2.4 2.5 2.6

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Introduction 121 ‘Men, Money and Markets’ in the British World 123 Nazi Economics: The Revolution Devours Its Parents 132 Economic Nation-Building in Palestine 143 Fighting for Industry: China’s Nationalists at War 151 From Italy to Romania to Brazil: Mihail Manoilescu’s Dictators

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Policy in a World of Nation-States, 1946–1978 6.1 6.2 6.3 6.4

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Introduction 223 Separatism and the Breakup of the Soviet Economy The Advent of ‘Wealth and Power’ in China 238 Diaspora and Development in Malaysia 253

Populist Discontents, 2002–2021 8.1 8.2 8.3 8.4 8.5

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Introduction 180 Argentina, Egypt and a Populist Backlash 182 Nationalism and Socialism: Ghana and Tanzania 194 The Nationalist Exporting State in East Asia 206

The Incomplete Building of a Global Economy, 1979–2001 7.1 7.2 7.3 7.4

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Introduction 268 ‘Gas for Bolivians’: Resource Nationalism and the Environment The Fragmenting European Union 281 Chinese Techno-Nationalism and Digital Swadeshi 296 America First 307

Conclusion and Outlook: Explaining Economic Nationalism 323 Notes Index

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1 Introduction: Nationalists Think About the Economy

On 23 February 2017, Steve Bannon, then chief strategist to US President Donald Trump, stated that the new administration would pursue an ‘economic nationalist agenda’. This phrase caused a stir among journalists attempting to explain the term. They did not find much. ‘Economic nationalism is not a real economic theory’ opined Forbes, while vox.com described the concept as ‘total nonsense’. The British Independent concluded that the idea ‘seems to have emerged from Mr. Bannon’s mind, rather than being any kind of concept used in political science or economics’.1 The notion that we should not pay attention to what nationalists say about the economy may be attractive, but it is also short-sighted. Nationalism is one of the fundamental forces shaping the modern world. It has formed the size and institutions of the states we live in; nations have inspired fierce loyalty and fanatical animosity. In our times, nationalist movements have come to the fore in the United States, Europe and within the governments of emerging powers such as India and China. It would be surprising if all this sound and fury had no bearing on the content of economic thought and policy. Do nationalists leave their ideology behind once they become economics professors, bankers or finance ministers? I argue in this book that there are fundamental commonalities in the way nationalists view the economy. These commonalities are important enough to speak of a distinct nationalist approach to economic thought and policy. This does not mean all nationalists think and act in the same way – many policy positions are hotly contested among nationalists. But it does mean that nationalists choose their economic aims from a common menu. The basic options on this menu are, first, isolation from the world economy, and second, economic expansion. Attempts to overcome the potential conflict between these two aims drives much of nationalist policymaking. My purpose in this book is to understand why nationalists have chosen these particular economic aims and how they have tried to implement them since the birth of modern nationalism in the late eighteenth century. One reason for the emergence of a nationalist tradition in economics is the surprising ease with which nationalist ideas have travelled globally. Over the past two centuries, nationalist thinkers have built cross-border networks to 1

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develop and disseminate their creed. A history of economic nationalism therefore has to be a global history that traces the development and worldwide diffusion of these ideas.2 At other times, nationalists in different regions developed similar ideas, not because they were in contact, but because they faced similar circumstances. The book is therefore also an economic and political history of why such ideas arose, why they became powerful and how they were translated into policy. At the root of economic nationalism’s appeal, I argue, is its ability to capitalise upon economic inequality, both international and domestic. These inequalities are sometimes reinforced by imperial modes of rule, ethnic divisions and economic crises. These factors have aided the emergence of nationalist movements that have decisively shaped the global exchange of goods, people and capital over the past two and a half centuries.

1.1 The Nationalist Dilemma What do nationalists want economic policy to accomplish? In an abstract sense, economic nationalism is the belief that the nation and the economy should be congruent. This is a straightforward extension of Ernest Gellner’s well-known definition of political nationalism as the idea that the nation and the state should be congruent. Gellner’s political nationalists strive to create an independent state as the ultimate fulfilment of nationhood. In the same way, many economic nationalists want to build an independent economy, one that is populated by co-nationals.3 They will seek to promote trade and investment between compatriots, and restrict economic contact with foreigners. They will strive to maximise the ownership of assets and employment by fellow nationals at the exclusion of others. In other words, privileging exchange within rather than beyond the nation is a key nationalist goal. I call this aim the isolationist motive.4 The desire to isolate operates at the level of the nation.5 If the nation is synonymous with a particular state (it is a ‘nation-state’), then the levers of government can be used to implement external barriers in the form of tariffs, capital controls and restrictions on migration. At the same time, economic nationalists will strive to tear down internal barriers to trade, for example by building infrastructure to integrate domestic markets. Economic nationalism thus seeks to create economies that are easily navigable internally, but protected against outside influence by a hard shell.6 Many nationalist intellectuals have therefore attacked classical liberal economic theory that promotes international exchange. These nationalists see themselves, and are commonly seen by liberals, as the antagonists of globalisation.7 The wish to isolate, however, becomes more difficult to fulfil if nationalists do not (yet) possess a state to call their own. A nation may be part of a multiethnic state or a larger empire, such as the Austro-Hungarian Empire or the Soviet Union. These states were home to many ethnic groups, some of

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whom self-identified as nations. In these cases, economic nationalists used provincial administrations, voluntary associations or informal boycotts to reorganise economic interactions along ethnic lines. Such sub-state nationalism does therefore not always build on government intervention and may instead rely on grassroots activism. Moreover, such action is not necessarily directed against cross-border integration; it is directed against other local ethnic groups or the imperial metropolis. For example, Ukrainian nationalists in the early 1990s looked to sever ties to Russia, but they had no issue with globalisation as a whole.8 In yet other cases, ethnic groups cut across state borders. Some nationalists have attempted to weld members of a global diaspora into one nation. The Jamaican campaigner Marcus Garvey attempted to organise a Black economic community spanning the United States, the Caribbean and Africa in the 1920s. British imperial planners of the interwar period hoped to craft a transoceanic Britannic sphere of exchange between the predominantly white dominions in Britain, Canada and Australia. Zionist nation-builders in Palestine encouraged the immigration of Jews from Europe and Russia, even as they advocated isolation from local Arab communities. More recently, the People’s Republic of China has leveraged ethnic Chinese business networks in South-East Asia as sources of capital and managerial skill. On all these occasions, nationalists advocated greater exchange within national groups straddled across state borders. These cases illustrate that the isolationist impulse does not always imply an aversion to cross-border exchange, nor an automatic resort to state intervention.9 The isolationist motive is not the only aim of nationalists. Many nationalists have interpreted the basic principle that the economy should correspond to the nation in a different way, and that is by appealing to identity. Nationalists have a vision of what they prefer their nation to look like, and they desire an economy to correspond to that vision.10 Irish nationalists imagined their island as a stronghold of small farmers, as did Thomas Jefferson in the United States. Gandhi preferred to think of Indians as small-scale weavers of textiles, while nineteenth-century German ‘Romantics’ saw themselves as a nation of guild-bound medieval artisans. These ideas of economic identity were explicitly anti-modern and therefore compatible with a desire to isolate the nation from advancing globalisation. Harking back to such supposedly ancient identities is what many scholars see as a characteristic feature of nationalist thought.11 It turns out, however, that many nationalists do not want to identify their nation as ‘backward’. They wish it to become modern, advanced and industrial (qualities that they usually see as closely related).12 There are two reasons why nationalists often champion a ‘modern’ identity for their nation. First, the political nationalist goal of congruity between nation and state is often only a starting point; once achieved this national sovereignty must be strengthened

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and defended against perceived external threats.13 Nationalists often see a mutually reinforcing relationship between a ‘modern’ economy comprising industry, advanced technology and financial resources, on the one hand, and the political power needed to strengthen sovereignty. This is a feature of western neomercantilist thinking, as well as of Chinese writing on ‘wealth and power’. The message is simple: Growing wealth increases national power.14 Second, nationalists may receive a psychic payoff from a modern identity, because they tend to evaluate the position of their nation relative to that of others. Ever since British industrial production started to forge ahead in the late eighteenth century, intellectuals in lagging countries have been appalled by the sudden rural ‘backwardness’ of their nations. Thinkers such as the American statesman Alexander Hamilton and the German economist Friedrich List became the prophets of this new desire for catch-up growth. Their disciples from Japan, Russia and Brazil followed their call to found banks, invest in factories and build railways.15 I call the desire to achieve a level of economic development commensurate with a ‘modern’ national identity the expansionist motive.16 In their determination to foster economic development, expansionist nationalists have pursued a broad range of policies. While some have relied heavily on state intervention to push investment in the desired direction, others have adopted liberal economic policies. Friedrich List himself, and many American nationalists of the early nineteenth century, were heirs to liberal traditions that stressed individual rights and freedoms.17 Many nationalist reformers in peripheral economies, including Imperial Russia, were perceived by their compatriots as liberal ‘Westernisers’. At the end of the twentieth century, nationalists on Taiwan or in the Baltics similarly believed that extensive economic liberties and commercial integration with the United States or Europe best benefited their national development projects. Notwithstanding this potential resort to liberal policies, it is important to note that expansionist nationalism is different from the desire to raise individual utility that is at the heart of liberal economic thought.18 In fact, many nationalists have explicitly rejected the focus on individual welfare in ‘mainstream’ economics. Expansionist nationalists care about economic growth at the national, rather than at the individual level (and often dispute that these are linked). Nationalists further privilege those dimensions of development that are relevant to building military power and political prestige, rather than personal consumption. Unfortunately for nationalists, this desire to expand production often conflicts with their simultaneous wish for isolation. We will encounter many examples of this conflict in the book. As Deng Xiaoping found out in the 1970s, China’s isolation from global trade during Mao Zedong’s rule had left the country poor and weak. Japanese reformers both in the 1880s and in the

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1950s realised that previous periods of autarky had hurt their capacity to innovate technologically. Bolivian nationalists in the 2000s worried that expropriating multinational mining companies could jeopardise access to foreign capital, thus hurting growth. In all these cases, isolation conflicted with the expansionist motive. The potential for conflict is heightened because the expansionist motive, almost by definition, is most pronounced in nations at the periphery of the world economy. Yet it is exactly here that the need for foreign capital, imports and technology transfer is the highest and isolation therefore the costliest. In sum, nationalists often chase two aims, expansion and isolation. In many situations, these are mutually incompatible. The problem of reconciling these conflicting aims is the core tension implicit in nationalist thinking on the economy; this is the Nationalist Dilemma. The effort by nationalists to overcome this dilemma is the core determinant of nationalist policymaking.19 The standard nationalist response to the dilemma has been to seek a middle way between isolation and expansion. Nationalists have often accepted the necessity of international exchange, but at the same time have attempted to place it within closely circumscribed limits. Friedrich List advocated free trade in raw materials and foods, but wanted to protect the output of modern industry. Other nationalists have pursued their version of globalisation à la carte by screening multinational companies, placing limits on the sectors eligible for inbound investment, or forcing foreign firms into joint ventures with domestic partners. In order to accomplish this, thinkers as diverse as Sergei Witte in Russia and Sun Yat-sen in China envisaged a strong state that would regulate foreign capital. A second nationalist strategy has been to optimise the mobilisation of resources within the nation. If more could be obtained from within the nation’s borders, there was less need to go beyond. Many nationalists have believed that one way to mobilise domestic resources was through communitybuilding projects.20 In nineteenth-century central Europe, Meiji Japan and colonial Egypt, nationalists encouraged the formation of credit cooperatives and banks that were supposed to marshal financial funds for development based on communal ties. Others have tried to modify their country’s political system in order to organise the economy more efficiently. In the interwar period, economists in Mussolini’s Italy praised dictatorship as the path to development, as did the Romanian technocrat Mihail Manoilescu. After the war, some nationalists, including Kwame Nkrumah in Ghana and Julius Nyerere in Tanzania, defended socialism as the most effective way to advance domestic growth.21 Not all nationalists have acknowledged a conflict between expansion and isolation. Mao Zedong believed that autarky would actually advance industrialisation (with disastrous results during the Great Leap Forward). The majority of nationalists have not gone so far, but many have believed that a moderate

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degree of isolation could aid development. List defended the temporary protection of nascent industries against foreign competition. However, he acknowledged the dilemma by arguing that permanent isolation would hurt growth.22 The American writer Henry C. Carey, who had significant impact on the policies pursued by the Lincoln administration, went further than List. He argued that isolation could increase growth as it would shield the national economy from foreign disturbances. Carey could afford to ignore the dilemma to some degree, because the United States was already a technologically advanced economy in the 1860s, as well as being rich in land, markets and raw materials. In other words, the United States was able to cope with the costs of isolation because it was a large country. Many nationalists have realised, as Carey had, that self-sufficiency was easier for countries with access to abundant internal resources and markets. Such countries could grow even in isolation, thus transcending the dilemma. This has led some nationalists to advocate economic unions between ‘friendly’ nations and promote regional integration. For others, it has provided an economic motive for territorial conquest. Nationalists in late nineteenthcentury Germany proposed that trade was best organised within closed imperial blocs, an aim that came to fateful fruition in the interwar period. Adolf Hitler’s genocidal grab for Lebensraum in Eastern Europe was driven by the acquisition of land for German agriculture, while Japanese militarism in East Asia was partly motivated by the conquest of resources for industry. In both cases, fascists saw imperial enlargement as a prerequisite for autarky.23 A final option for nationalists to blunt the tension inherent in the dilemma is to downgrade either the goal of expansion or that of isolation. For example, some nationalist movements place greater emphasis on internal equality rather than parity with other nations. Nineteenth-century French schools of thought and many populists (such as Argentina’s Juan Perón or Egypt’s Gamal Abdel Nasser), believed that globalisation had escalated domestic inequality. They were primarily interested in remedying this internal inequality by cutting international links. Other nationalist movements have striven to remedy international inequality and have consequently stressed economic expansion as their primary aim, sometimes adopting relatively liberal policies with regard to international exchange. Yet even though individual nationalist movements may abandon either isolation or expansion, this does not stop the dilemma itself from operating. It just means that the vacant position is occupied by a different nationalist movement. This gives rise to competition between nationalist groups. In early nineteenth-century Germany, the isolationism of Adam Müller and Johann Gottlieb Fichte was countered by the expansionist ideology of Friedrich List. The imperialism championed by Max Weber in the 1890s was opposed by the inward-looking chauvinism of Adolph Wagner. In 2020, the protectionism of Donald Trump met its match not only in the ‘Buy American’ of Joseph Biden,

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but also in the left-leaning ‘economic patriotism’ of Elizabeth Warren. These examples show not only the conflict among different nationalist motives, but also that nationalist positions on the economy can appeal to constituencies across the political spectrum.24

1.2 The Passions and the Interests Given the tendency for nationalists to occupy a variety of policy positions, one may object that economic nationalism is nothing but a smokescreen for underlying material interests.25 On a superficial level, interests indeed reign supreme. Nationalist politicians, such as the American Whig Henry Clay, have typically sponsored protectionist legislation that was popular with their constituents. In the 1920s, Chinese, Indian and Egyptian entrepreneurs profited from selling ‘national products’ to a patriotic clientele. At all times, nationalist intellectuals promoted ideas that benefited some interests more than others: List’s infant industry protection helped industrialists, rather than farmers. Yet the fact that successful ideas correspond to powerful interests does not imply that the generation of these ideas is driven, in a causal sense, by these interests. On the contrary, it has sometimes been ideas about national development that have helped to congeal coalitions between different interest groups and helped them to articulate their demands in a powerful way. None other than John Maynard Keynes wrote of the conquering force of ideas: ‘It is ideas, not vested interests, which are dangerous for good or evil’.26 We do not need to go that far, however. In a deeper sense, the dichotomy between ideas and interests is a false one. The way economic actors define their interests is driven by their perception of opportunities and constraints, as well as by their sociocultural identity. Perceptions and identity, of course, are influenced by ideas. ‘[T]hough men be much governed by interest’, David Hume recognised two and a half centuries ago, ‘interest itself [is] entirely governed by opinion’.27 For illustration, consider the consumption of ‘national products’ in China, which was a big trend in the 1920s. In the 1820s, on the other hand, this had not been the case. A consumer may have purchased certain goods to correspond to their identity or preferences as a scholar, farmer or inhabitant of Beijing, but not primarily as a Chinese national. The idea that a Chinese nation existed, that it was different from other nations and that it should be defended by consuming Chinese over Japanese or British products gradually took root over the nineteenth century. This was largely the result of efforts by nationalist intellectuals. The fact that Chinese businesses could profit from this movement by selling ‘national products’ does not prove the vacuity of the underlying idea. Selling ‘national products’ in the 1920s accorded to their business interests precisely because it had become a powerful idea.28 Of course, not all settings are equally fertile for nationalist ideas. In the Chinese case referred to above, the idea of patriotic consumption might not

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have germinated into a proper movement had it not found an audience whose traditional identities and consumption patterns had been shaken by war and foreign imports. In many situations, the way ideas travel between contexts also matter. The ideas of German intellectuals were popular in late nineteenthcentury India and Ireland because Germany was seen as a successful economy worth emulating. In Italy and Russia, the same ideas met with resistance because a rising Germany was seen as a geostrategic competitor. Furthermore, the ability to realise policy on the basis of any idea depends not only on the mobilising potential of the original idea, but also on a host of ‘external’ factors, including the availability of fiscal resources and the configuration of the political system.29 In other words, any attempt to neatly divide ideas and interests in a historical investigation that spans decades or even centuries is likely to fail. Ideas and interests are complements, and as an economist might say, endogenous over the long run. The opportunity to shed light on the co-evolution of structure and ideas is in fact one of the benefits of writing history over the longue durée.30 While this co-evolution is naturally specific to each historical case I examine, it does tend to follow a general pattern. The starting point is often the work of nationalist thinkers who see themselves as intellectual pioneers – even though their work is frequently conditioned by the context in which they operate. Subsequently, these ideas are taken up by political movements, and if successful, are embedded in the institutions and policies of (self-described) nation-states. The narrative chronology of the book will follow this trajectory writ large, gradually shifting from a focus on intellectual history to an analysis of policy.31

1.3 Understanding Economic Nationalism Recognising the uniqueness of each individual case, how can we ever understand economic nationalism as a general phenomenon? A good starting point is Max Weber’s methodology for understanding ‘meaningful action’.32 For Weber, meaningful action is the result of an individual’s conscious motives. This is conceptually distinct from an impulsive reaction triggered by environmental forces. Motives need not be ‘rational’ in a strict sense, but they are the result of thinking and reflection that is not wholly determined by the external environment.33 I deduce a number of methodological rules for the study of economic nationalism from Weber’s approach, while keeping a critical distance from his work.34 It is first of all important to understand motives, if we are to understand actions.35 I therefore pay much attention to what nationalists write and say. This allows contemporaries to speak with their own voice. It also means that I do not impose a definition of what a nation should be on historical actors. Nations can take different forms, based on ethnicity or civic citizenship, but for

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my purposes the content of any particular nationalism is whatever nationalists declare it to be. This does not mean that I take the nation at face value, rather it is a recognition of the fact that any nationalism is constructed precisely by the narratives I examine in this book.36 The focus on recorded ideas does nonetheless come with caveats. Examining those whose thoughts have been preserved for posterity privileges those who had the power to speak and write. My global history includes actors from diverse ethnic, national and religious backgrounds, but nationalist activists in any society were mostly middle-class, well-educated and male. To avoid resurrecting a ‘Great Man’ theory of history, I pay particular attention to nationalist mass movements, as well as to structural factors. A further drawback to engaging with nationalist thought is that it gives space to ideas that some might find academically irrelevant. Many nationalist theories about the economy are not backed up by statistical evidence or by a theory that modern economists would accept as such. However, it is not my objective to evaluate whether the ideas of Henry Carey as to the salutatory effect of tariff protection on growth were ‘true’. My main objective is to examine the origins of these ideas, their internal logic and their impact on policy. Similarly, I do not attempt to draw any general connection between nationalism as a phenomenon and actual development outcomes. Such links are likely to be tenuous. Some countries with strong nationalist movements, such as Japan, grew quickly. Others, such as India, did not.37 It may be that certain types of economic nationalism, for example those guided by expansionist motives, can be conducive to development. However, the will to develop does not imply the ability to do so, because structural constraints still matter. Other writings examined in this book will be objectionable on moral grounds. Max Weber’s own diatribes against Polish workers, the propaganda of the Young Turks against Armenian businesses in the Ottoman Empire, the antisemitic stereotypes marshalled by Werner Sombart, the Sinophobia of Mahathir Mohamad – all these make for unpleasant reading. And then there is Mein Kampf. There is little use in feigning neutral detachment in these extreme cases – they should be condemned when encountered – but analysis is nonetheless necessary.38 Economic nationalists did not only write on tariffs and banking. For some authors, the exclusion of immigrants and the discrimination of ethnic minorities were integral elements of building a national economy. Ignoring this facet, as the literature on economic nationalism has sometimes done, would present a distorted picture. As a second rule, I work with stylised typologies of economic nationalism, or ‘ideal types’ in Weber’s terminology. My distillation of nationalist motives into isolationist or expansionist types does this. Naturally, no set of ideas or policies will correspond exactly to these types.39 The Nationalist Dilemma arises precisely because actors often mix these motives. Nonetheless, these ideal

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types are important, because they help to demarcate nationalist motives from other reasons actors may have to support certain economic policies. Consider isolationism. There exist many non-nationalist arguments opposing economic integration. For example, European governments restricted migration in 2020 in response to the coronavirus pandemic, but the primary motive was public health, not the desire to build a national economy. Similarly, steel workers urging protective tariffs for their declining industry may frame their appeal as a defence of their livelihoods, rather than invoking nationhood. During the Eurozone debt crisis, some activists in southern Europe opposed the common currency, because they feared that it would foment unemployment and social dislocation. These arguments for isolation can be made entirely without reference to nationality. Naturally, these calls can be reinforced by nationalist arguments, and they often are, but we should not assume that opposition to international integration is always nationalist. A history of economic nationalism is therefore not a general history of protectionism nor of anti-globalisation movements.40 Just as not all attempts at isolation are nationalist, neither are all proposals calling for economic expansion. As mentioned, efforts to increase incomes or alleviate poverty on grounds of individual welfare fall beyond the purview of this book. So do most commercial policies practised by early modern states, often summarised as ‘mercantilism’. As a discourse that sought to manage and expand trade, mercantilism carries some superficial similarity with expansionist forms of economic nationalism. However, the objective of most mercantilists was to enrich the state or the ruler, rather than the nation.41 Nationalism only became a potent force with the American and French revolutions, when mercantilist practices were already being phased out. I therefore restrict the scope of the book to the period starting in the late eighteenth century.42 Nonetheless, we will see that the line is not always so stark.43 Some mercantilist ideas survived for much longer, particularly in the United States and France, and indirectly in Japan and China. There they exerted an influence on nationalist thought proper. My third methodological pillar is to explore a large number of historical case studies and leverage comparisons between these cases. This helps to demarcate the factors that drive the emergence of different types of economic nationalism.44 For example, a comparison between Egypt and South Korea in the 1960s can shed light on the reason that Egyptian leaders chose isolation, while Korea under Park Chung-Hee settled on export-led expansion. Global history in this sense does not only involve looking for direct connections between cases, but also examines the structural conditions that shape the genesis and evolution of nationalist action.45 Yet even a global history is not an exhaustive history. I have therefore selected case studies based on their capacity to elucidate the relationship between economic nationalism and an important theme, such as inequality,

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ethnic conflict, populism, migration, imperialism, democracy or the environment. Each section then has a thematic, as well as a geographic and historic, focus.46 For instance, studying Ghana and Tanzania in the 1960s informs us about the compatibility of nation-building and socialism. This in turn is important for understanding the way that nationalists in China or in the Soviet republics wrestled with combining these seemingly contradictory ideologies. Finally, we require context if we are to understand complex historical motives.47 This brings economic and political history back into the picture.48 We cannot understand the attractiveness of Manoilescu’s industrialisation strategies for interwar Brazil without appreciating the dependency of the Brazilian economy on exporting coffee and the ‘oligarchic’ political system this enabled. This is one point of distinction between this book and a recent attempt to write a global intellectual history on a related topic: Eric Helleiner’s magisterial The Neomercantilists. Helleiner relates the theoretical contributions of some thinkers covered in this book in the period before the Second World War. He focusses our attention on the diversity of these contributions, evaluating their structure, rather than their origins. While a close attention to context comes, as Helleiner rightly emphasises, at the cost of necessitating lengthy exposition, it does have its rewards. The systematic comparison of contextual factors across time and space, as I do in this book, helps to explain why different types of economic nationalism might arise. I summarise the main lessons of this investigation in the final chapter. For now, it is most useful to think of different kinds of economic nationalism as reactions to economic inequality. If inequality occurs between nations, we are more likely to witness expansionist ideas gain prominence. If inequality occurs within nations and is blamed on integration with the world economy, it is most likely to give rise to isolationist ideas. Both kinds of economic inequality are often accentuated by political inequalities. The motive for catch-up growth becomes more pressing if the nation is seen as politically subordinate within a system of imperial rule. Domestic inequalities are frequently given salience if they correspond to ethnic divisions within society. These are highly stylised patterns, but they are based on exploring two and a half centuries of global history. We now turn to this history, commencing with the birth of economic nationalism in the newly independent United States.

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2 The American Community of the Common Man, 1776–1860

2.1 Introduction The United States of America was one of the first modern nations. American economic thinkers therefore developed many themes that would influence subsequent nationalist thought across the world. Moreover, much early American thinking on the economy was motivated by the country’s colonial past, a feature it shares with later anti-colonial movements. Like policymakers in twentieth-century Africa and Asia, American thinkers struggled with the Nationalist Dilemma. One the one hand, they sought to isolate the new nation from Britain, the former imperial power, but on the other hand they wanted to maintain economically productive links with that same power. It is therefore important to understand in some detail the aims of early American policymakers, as well as the conflicts they encountered when attempting to shape their commercial affairs. The inhabitants of the Thirteen Colonies rebelled in part against British commercial restrictions, which infused American thinking with an enduring free-market strain. At the same time, military and commercial conflict with the former imperial metropolis accentuated the fragility of the republic’s independence and provided US policymakers with a rationale for economic intervention. Intervention had two aims, both of which have become fundamental to ensuing nationalist thinking on the economy. First, policymakers sought to integrate the fragmented economies of the individual American states. In 1789, the Constitution provided a framework within which a unified market could be created. Nationalist statesmen, in particular Alexander Hamilton (1755–1804), built on this fundament by fostering centralised credit markets and sponsoring infrastructure investments. Second, Hamilton complemented domestic unification with an ambitious strategy of economic expansion to guarantee the military security of the new nation. His plans envisaged the transformation of the agrarian republic into a dynamically growing industrial power. This arguably constituted the first programme of expansionist economic nationalism. Yet Hamilton also encountered the Nationalist Dilemma. While he was ready to use government subsidies and tariffs to nurture native manufacturing 12

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enterprises, he recognised that the United States needed to maintain its openness to foreign direct investment, trade and skilled migrants coming from Britain in order to foster economic growth. This compromise aroused the opposition of Thomas Jefferson (1743–1826) and James Madison (1751– 1836), who pressed for a more combative stance in international trade. Hamilton’s programme also did not satisfy influential grassroots supporters of manufacturing, who saw his policies as benefiting a small financial elite.1 As nationalist agitation involved ever wider sections of the population, American policy discourse moved away from Hamilton’s ‘elitist’ positions. This process was spurred by several years of actual and commercial warfare, as well as the financial crisis of 1819, all of which accentuated the dangers of economic openness. The new mass movement that emerged from these reverberations drew on notions of national self-sufficiency and popular participation, finding its theoretical synthesis in the writings of Daniel Raymond (1786–1849). The democratisation of American economic nationalism led to a pivot from expansionist motives towards isolation, a pattern that we will encounter repeatedly.2 Motives were important, but in America, as elsewhere, political interests shaped the implementation of ideas. Those elements of Raymond’s programme that were amenable to middle-class voters – mainly the development of domestic markets safeguarded by import tariffs – found an able advocate in the politician Henry Clay (1777–1852) and his iconic ‘American System’. Even the politically astute Clay encountered fierce resistance, however. His attempt to force tariffs against the free-trading and slave-holding southern states placed the Union under increasing strain in the 1830s. Responding to these tensions, a new generation of economic nationalists, led by Henry C. Carey (1793– 1879), changed tack once more. Attempting to depict tariff protection as a panacea to America’s social divides, Carey promised a ‘Harmony of Interests’ that would once again unite the nation. Carey’s influence proved decisive in persuading Abraham Lincoln (1809–65) and the emergent Republican Party to adopt a long-lasting protectionist platform in the late 1850s. Yet the ‘Harmony of Interests’ proved elusive, also because many nationalists did not intend such harmony to include black Americans.3 Nonetheless, economic nationalists remained largely supportive of immigration, which they believed would augment national strength. With immigration also came the import of foreign ideas. This proved useful, because expertise from abroad helped to bolster the authority of protectionist economic theories. Imported nationalists, such as the Irish activist Mathew Carey (1760–1839), therefore played a large role in pushing a pro-manufacturing agenda in the United States. The most influential immigrant, however, proved to be the German economist Friedrich List (1789–1846), whose exchange with American thinkers during the 1820s would form the cornerstone for his influential The National System of Political Economy.

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2.2 Independence and Integration American economic nationalism had its origins in resistance to British mercantilist policies. While many colonists thought these policies to be overly restrictive of their commercial liberties, the lessons they drew from the colonial experience varied. Thomas Jefferson promoted a republican idyll of decentralised agricultural communities and free trade, in effect creating an antithesis to industrial and mercantilist Britain. Nationalists like Robert Morris (1734– 1806), however, were mindful that such decentralisation might leave the new republic weakened in the face of Britain’s might. They sought salvation in the creation of an integrated market economy with centralised financial institutions. Small-scale manufacturers, as a third strand of thought, feared British imports and pushed for a protective tariff policy (which itself bore many hallmarks of mercantilist restrictions). The US Constitution was one attempt to reconcile these different strands by providing an institutional framework for domestic market integration and an independent trade policy. This set the stage for later nationalist programmes. *

When the United States formally declared its independence in 1776, Americans could already look back upon a long history of grappling with questions of trade and political sovereignty. The formation of American nationhood had been decisively shaped by debates surrounding the economic dependence of the Thirteen Colonies on the British Empire. British taxation of imports into the colonies, especially tea, had famously inflamed American passions (despite its modest economic impact). The increasing severity of the mercantilist Navigation Acts, which restricted American freedom to trade, provoked continued resistance from colonial merchants.4 British attempts to safeguard the emerging pre-eminence of the motherland in manufacturing also invited criticism. For instance, imperial prohibitions on the erection of iron manufactories in the colonies served as a vivid reminder to colonists that America’s place in the British intercontinental economy was to supply primary commodities, especially cash crops such as tobacco and indigo.5 The colonists hit back against British trade policies through boycotts, such as the non-importation movements of the 1760s. Often organised by local groups of merchants, artisans and patriotic students, they involved a common public pledge not to purchase British manufactures. Sometimes artisans would also commit to work exclusively with American ‘homespun’ materials. Nonimportation movements were initially instrumental in their intent, aimed at the removal of restrictive British tax and trade legislation. Yet these movements soon developed their own dynamic.6 The boycotts aided the creation of an American consumer culture based on domestically produced manufacturing products, as well as providing income for the embryonic American

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industrial sector.7 Most importantly, boycotts linked the notions of economic and political independence in the minds of early American leaders. Benjamin Franklin (1705–90), a one-time staunch defender of British trade policy, exhorted his rebellious countrymen in 1769 that ‘we should disdain the thralldom we have so long been held in by this mischievous commerce, reject it for ever, and seek our resources where God and Nature have placed them WITHIN OUR SELVES’.8 Non-importation movements were the first stirrings of an American grassroots movement motivated by self-sufficiency. Victory in the American Revolutionary War in 1783 ensured political independence and freed Americans from onerous British commercial legislation. Yet the young republic, politically and economically divided, faced its first major economic depression. The disintegration of colonial trade ties depressed commerce and hence incomes. British mercantilist restrictions also continued to inhibit trade with the British possessions in the Caribbean. Trade negotiations with other powers proceeded slowly due to the lack of policy coordination between the independent US states, whose unity under the Articles of Confederation was tenuous.9 The Articles provided only for a weak central government. Individual states were free to regulate their own trade, frequently taxing interstate trade for revenue purposes. Disunity had monetary implications too. Each state was free to issue its own notes, a privilege some states abused through heavy use of the printing press. There was moreover little provision of domestic banking services, which still had to be carried out through the London market. Finally, the expenses of the Revolutionary War had led to states accruing large amounts of debt. Many creditors were patriots who had supported the war effort, thus endowing the debt with a particular political significance.10 Given the importance of economic motivations for independence, the disappointing performance of the post-colonial US economy came as a shock. This eased the search for institutional alternatives. Two issues were at the forefront of the debate. The first was how to foster internal unity, the second was how to respond to the challenge posed by hostile British trade policy. Already during the war, voices had emerged calling for political unity and economic centralisation. Some of these came from army officers, such as the young Alexander Hamilton, serving on George Washington’s staff. Many officers had become dispirited at the inability of the decentralised Continental Congress to adequately pay and equip the fighting troops. Other discontents were merchants, who advocated larger domestic markets unencumbered by interstate restrictions. In 1781 these positions found reflection in the programme of a group of nationalists centred around Robert Morris, Superintendent of Finance of the new Confederation.11 Morris stood for an ambitious programme of fiscal and financial unification, proposing that statelevel debts be assumed centrally. Centralised debt would be funded through

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a permanent federal tax, as well as through the emittance of securities by the Confederation.12 Morris justified a centralised debt on grounds of nationbuilding, claiming that it ‘give[s] stability to Government by combining together the interests of moneyed men for its support, and consequently in this Country a domestic debt, would greatly contribute to that Union, which seems not to have been sufficiently attended to, or provided for, in forming the national compact’.13 As he linked national unity to fiscal unity, Morris was in correspondence with Alexander Hamilton, whose defence of fiscal centralisation a decade later would tread a similar path.14 Unlike Hamilton, however, Morris had little to say regarding the external orientation of the US economy. In general, Morris’ concept of centralisation implied neither overwhelming state intervention nor protection. Early nationalists were quite explicit in ascribing a key role to market incentives, merchants and especially banks in driving a modern commercial economy.15 Credit was to be the driver of growth and in order to supply the cash-starved US economy with capital, Morris founded the Bank of North America in 1781. The country’s first bank, Morris planned, would develop into a nationwide bank under public auspices, furthering national financial integration.16 The nationalists did not represent a dominant view in the mid-1780s, however, because they faced stiff competition from the Jeffersonians. As effective veto power remained with the individual states, most of the nationalist projects failed to become law.17 Thomas Jefferson, a politician, architect and planter from Virginia, provided the most influential template for the political economy of the early republic. Jefferson had been one of the authors of the Declaration of Independence and his word carried weight. In his Notes on the State of Virginia (1785), Jefferson sketched an idealised picture of his state as a republic populated by independent yeomen farmers.18 Farmers were ‘the chosen people of God, if he ever had a chosen people, whose breasts he has made his peculiar deposit for substantial and genuine virtue’.19 The virtue that Jefferson thought was peculiar to farmers was republican virtue, a civic spirit that would provide the bedrock of political freedom.20 Although Jefferson, like Franklin, promoted small-scale manufacturing in a household setting, he abhorred large factories and therefore preferred importing manufacturing products. ‘Let our workshops remain in Europe’, advised Jefferson, ‘it is better to carry provisions and materials to workmen there, then to bring them to the provisions and material, and with them their manners and principles’.21 The ‘manners and principles’ that large-scale manufacturing promoted, and which Jefferson feared, were the corruption, poverty and squalor that characterised British industrial cities.22 Jefferson had a clear vision of America as a distinct national community of independent farmers. He saw free trade, by saving the republic from the ravages of manufacturing, as a way to achieve this ideal.23 A close ally on matters of trade policy was Jefferson’s fellow Virginian James Madison, who expanded on the pro-agrarian argument. Madison believed that

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the demand for agricultural necessities was less volatile than the demand for industrial products, because the latter was susceptible to the whims of foreign fashion.24 Political independence and national security, which both Jefferson and Madison prized highly, therefore strengthened the argument for an agrarian economy. However, neither man advocated free trade at all costs. If any foreign nation were to threaten US trade, as Britain did through commercial restrictions, Jefferson felt that the United States should reciprocate with embargoes to force a policy change.25 Madison similarly argued that as a producer of necessities such as food, the United States held substantial coercive power over its trade partners, a power that could be used in the form of sanctions or embargoes.26 The republican ideas of Jefferson and Madison provided a powerful rival to the ‘nationalist’ position of Morris, and later Hamilton. Whereas Morris offered national integration and finance-led growth, the republicans wanted agrarian decentralisation and virtue. On trade policy, however, Jefferson and Madison were potentially more combative.27 The most aggressive foreign economic policy was pursued by the manufacturers and their intellectual champions. This third strand of American economic thought is easily ignored, propelled as it was by a grassroots movement that did not field thinkers quite of the calibre of Madison. The manufacturing movement was dominated by middling urban craftsmen (the ‘mechanics’). As such they fit neither into the Morris-Hamiltonian world of high finance nor into Jefferson’s agrarian idyll.28 They were, nonetheless, politically influential, especially in the Mid-Atlantic states such as Pennsylvania. The colonial non-importation movements had polished the patriotic credentials of these craftsmen and by the 1780s they were well-organised in mechanics’ societies that lobbied state legislatures for protection.29 Their programme had a mercantilist tinge. The mechanics’ treatises often argued that only a favourable balance of trade could guarantee independence. Given that the current balance was largely unfavourable, this provided an argument for prohibitions against foreign manufactures and a comprehensive regime of navigation laws to protect the American carrying trade.30 Two intellectual pioneers were instrumental in broadening the mechanics’ narrative beyond mercantilist restrictions. The first was Tench Coxe (1755– 1824), a merchant and manufacturer, who stressed that a balanced economy required the mutual interdependence of manufacturing and agriculture. This concession to rural regions was an attempt to soften the opposition of the agrarians. Coxe also advocated the use of internal improvements, that is investments in infrastructure, to tie different regions of the new country together. Coxe’s stance was influenced by Mathew Carey, who would soon become the most prominent spokesman for the protectionist movement.31 Carey was a recent exile from Dublin, where he had gained notoriety as a radical journalist covering the political battles against British trade policy in Ireland. Like the Thirteen Colonies, Ireland had a history of non-importation movements, which had sprung up in the mid-eighteenth century in opposition

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to British restrictions on Irish exports. Carey supported the patriotic spirit of ‘Buy Irish’, but wanted to go further than grassroots activism. In addition, he did not believe that the mere abolition of British trade restrictions and the introduction of free trade between Ireland and Britain would solve Irish economic woes. Fearing that Irish industry would perish in competition with its superior English counterpart, Carey agitated for protective tariffs. His writings found favour with an incensed patriotic mob that ran amok in Dublin in 1779, destroying the property of merchants under the slogan that ‘all importers are enemies of Ireland!’ This did not play well with the British authorities, and in the ensuing crackdown Carey was forced to leave Ireland.32 Carey’s first stop in exile had been Paris, where he had met Benjamin Franklin and the Marquis de Lafayette (1757–1834), a hero of the American Revolutionary War who arranged his passage to the United States. His journalistic activism in Ireland had equipped Carey with a sharp pen and a visceral aversion to Britain, both of which he put to use in the United States.33 With help from the Marquis, he set up a publishing house in Philadelphia which published a magazine, The American Museum, that soon gained a large circulation among the elites of his new home. Billed primarily as a cultural periodical, The American Museum also carried frequent pieces by authors advocating protectionism, thus pushing the topic into the political mainstream.34 The protectionism Carey advocated pivoted around tariffs, rather than wholesale prohibitions, and was therefore more amenable to American notions of commercial liberty. He seems to have been one of the first exponents of the infant industry argument in the United States, predating Hamilton. In all likelihood, Carey imported the concept from Ireland, where he had developed it under a pseudonym.35 A capital-scarce country like Ireland, with little experience in manufacturing, could not compete against Britain, Carey had explained. It should therefore impose temporary tariffs to lower its costs until it could produce as efficiently as its British competitor. At that point, tariffs could safely be removed.36 Carey’s approach was useful to the mechanics’ cause because it was dynamic: temporary protection would avoid the baneful monopolies that Americans learned to loathe since their colonial days. Moreover, Carey was able to frame his argument in terms of the national good, rather than as just another talking point by manufacturing interests. Carey’s approach shows how protagonists of different intellectual traditions attempted to accommodate their programme to the political climate in the new republic. It is, in any case, easy to overstate the differences in economic policy proposals as they existed in the 1780s, especially in light of the bitterness of later controversies. Thinkers such as Madison did not always fit neatly into either camp – in trade policy, he supported Jefferson, but on issues of domestic centralisation he was closer to Morris.37 Many participants in these early debates, whether nationalists, republicans or protectionists, veered into mercantilist arguments or were prepared to use economic means to further goals of

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nation-building. Almost all participants also sought to devise institutions that would maximise the economic gains from political independence. Most eventually agreed that the Union’s internal fragmentation threatened economic prosperity and undermined the ability of the United States to conduct trade negotiations. It was also increasingly clear that without central authority, states pursued selfish, rather than national interests.38 Importantly, many thinkers sought a government that would extend the markets currently available to American merchants, both domestically and abroad.39 This consensus found its expression in the US Constitution, drafted with the aid of both Madison and Hamilton in 1787. The Constitution provided for a federal government with the power to tax external trade and regulate interstate commerce. This was a first step towards the creation of a unified national market and a coordinated external trade policy.40 In that sense, the drafters of the Constitution were following and shaping the nationalist consensus at the time. The Constitution was propagated by the Federalists, as the nationalists now styled themselves, who stressed the enlarged markets offered by the document. Any diverging interests in the new country, the Federalists argued, would be reconciled within the growing national economy that the Constitution would enable. The Federalists were successful in persuading their countrymen, so that the Constitution came into effect in March 1789.41 Nonetheless, the great debate about economic community had only begun. The Constitution did not define the external orientation of the American economy and was silent as to the depth of its domestic integration.

2.3 The Hamiltonian Proposal The Constitution provided a framework within which centralised economic institutions could be created. The person who created many of these institutions was Alexander Hamilton. He is the key figure in the transition from mercantilism to modern economic nationalism. Widely read in both mercantilist and classical economic literature, Hamilton crafted a vision that was at once liberal in its reliance on market incentives and foreign investment, but at the same time oriented towards growing American national power. Hamilton therefore formulated the first expansionist nationalist programme. While his policy interventions (encompassing subsidies, public banking and moderate tariffs) were moderate in comparison to those used by later nationalists, the national purpose of these tools was clear and could readily be extended by later practitioners. *

Born in the British Caribbean, Hamilton had spent much of his boyhood as an apprentice clerk with a trading company in the Danish West Indies, becoming well versed in the commercial practices of colonial mercantilism.42 Having

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settled in the United States in 1772, he attended King’s College in New York (later Columbia University), where he came into contact with political philosophy, in particular the writings of David Hume.43 He fought with Washington in the Continental Army, impressing the general with his keen intellect. This allowed him access to the social circles of the New York moneyed elites. Even while on military campaigns, he read widely on political economy and business practice. While a member of Congress after the war’s end, he closely studied Adam Smith’s The Wealth of Nations.44 Hamilton knew both the restrictive trade rules of the late eighteenth century, as well as the enlightened theory of classical political economy that was gaining ground. In his landmark reports as the first Secretary of the Treasury (1789–95), Hamilton drew on these writings (without mentioning them explicitly). He also incorporated the ideas of financial centralisation and protectionism that had been circulating within Morris’ financial circles and the mechanics’ societies.45 Some of Hamilton’s ideas drew on mercantilist patterns of thought, primarily his goal of increasing the power and prestige of the new state.46 He also exhibited a mercantilist tendency to evaluate policies according to their effect on the balance of trade and the accumulation of specie.47 His writings nonetheless impressed contemporaries for the breadth of their vision. He was remarkably prescient in his emphasis on the potential of the American home market and his belief in the power of machines to drive growth.48 Even to modern readers, Hamilton’s prose stands out from that of other authors of the period for its analytic style and positivist reasoning. Hamilton’s argumentation was thoroughly rooted in notions of economic choice and individual rationality, rather than the moral and idealistic categories of thought that characterised writers like Jefferson or Madison.49 This betrays Hamilton’s legacy to the Smith of The Wealth of Nations and classical political economy more generally. However, the purpose of markets in Hamilton’s world was not to raise individual welfare, but to further national ends. National reputation, the ‘respectability of the American name’, featured prominently in his writing. Even more important was the military security of the new republic.50 Security was to be achieved in two ways. One was to enhance the government’s ability to command resources quickly if the need for this arose.51 Hamilton regarded it as essential to reserve this option in light of the financial difficulties the Continental Army had experienced in the Revolutionary War and in light of the likelihood of a recurring war.52 The option to command production required centralisation of debt and taxes, internal improvements, a navy and a national bank. However, the ability to command resources would be of little use if the United States remained poor. Increasing production was therefore the second priority, and this demanded expansive credit policies and a burgeoning manufacturing sector.53 Autarky was not part of this design. Rather, much of Hamilton’s work is built on the premise that both autarky and economic growth were alternative ways towards increasing military security,

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but that there existed a trade-off between both means. For example, the inflow of foreign capital might increase the control foreigners enjoyed over the US economy. Restricting foreign investors might enhance short-term security. On the other hand, foreign investment was one of the most effective ways to increase production in a capital scarce country.54 Taking a longer-term view than most of his contemporaries, many of Hamilton’s financial policies premised that economic growth through openness was the principal way of obtaining national power, outweighing short-term gains from restrictive policies. This theme runs through Hamilton’s reports on public credit, which continuously caution against knee-jerk patriotism that could harm long-run national interest. The property of foreigners was sacrosanct and foreign debt should be paid back in full; a breach of contract on this point would discourage investors from supplying funds in peacetime that would be much needed should war break out.55 Similarly, Hamilton took a controversial ‘antipatriotic stance’ on the question of discrimination between holders of wartime debt. Madison had, with an essentially moral argument, demanded that the US government fully reimburse the original holders of that debt (many of them war veterans and other patriots who had loaned their funds to the fledging cause). Hamilton instead insisted on redeeming the debt to the current holders, many of whom were professional investors, who had purchased these instruments at a steep discount from often destitute patriots. What was at stake for Hamilton was the economic principle of transferability: investors had to be sure that the instruments issued by the US government would be negotiable between holders. If this were not the case, US paper would cease to be a liquid means of payment whose circulation would stimulate commerce.56 Hamilton’s attitude on debt discrimination also signalled whom he regarded as the community fundamental to the prosperity and strength of the United States: the well-off investors in the Northern states, with their stakes in banking and commerce. It was they who could marshal the resources that Hamilton needed for investment in US debt instruments, manufacturing and infrastructure.57 Hamilton’s policy of creating a funded federal debt presented a way to tap into this wealth. A centralised, permanent body of public debt, whose instruments would be held by investors around the country, would create a community shaped by the same financial interests. In holding a common stake in the national government, these investors would ‘cement more closely the union of the states’.58 This vision of an almost aristocratic economic community corresponded quite closely with the circles in which Hamilton was by now moving in New York. Another institution mobilising the wealth of the rich for the purpose of nation-building was the Bank of the United States. A national bank, Hamilton explained, would be indispensable to increasing and centralising the stock of available capital. This would aid industry and commerce, provide the

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government with funds and integrate national capital markets.59 These ends would be further supported by a national mint and a uniform currency.60 Hamilton did seek to prohibit foreigners from becoming directors of the Bank, for ‘such a Bank is not a mere matter of private property, but a political machine of the greatest importance to the State’.61 However, Hamilton also hoped to entice the interest of wealthy investors, including British foreigners, in the bank by interfering as little as possible with their operations and by upholding the security of their investment.62 Hamilton’s proximity to financial interests meant that the proposals on credit and the Bank were subjected to sharp criticism in Congress. Most virulent were the attacks by James Madison, who alleged that Hamilton’s redemption of the debt privileged ‘stock-jobbers’ over honest patriots.63 In the Bank, detractors saw ‘moneyed interests’ riding roughshod over the simple yeoman farmers Madison and Jefferson held out as paragons of republican virtue. Both men attempted to outflank Hamilton by adopting the language of patriotism themselves.64 But Hamilton’s gamble eventually paid off and his schemes for public debt and a national bank were enacted in substantially the form he had envisaged. The Treasury Secretary was quickly vindicated by economic success: the premium on US debt disappeared, interest rates declined and demand for US paper soared.65 Credit was Hamilton’s engine of growth, but the structure of the economy it was to propel forwards had yet to be determined. This was the purpose of the Report on Manufactures of 1791. The report offered a spirited defence of manufacturing and a list of measures to stimulate it. As before, Hamilton’s stated aim was military security and national power, building on the ‘total mass of industrious efforts in a community’, which was best realised through manufacturing.66 This sector would increase production by exploiting a finer division of labour and by providing a home market for American raw materials. Burgeoning manufacturing enterprises would also encourage immigration by high-skilled workers, increasing available manpower. It would furthermore draw previously ‘unproductive’ members of the community, namely women and children into production.67 Crucially, manufacturing was more amenable than agriculture to the use of machinery, a key driver in Hamilton’s dynamic vision of growth.68 The focus on machinery betrays the key influence of the manufacturer Tench Coxe, who drafted the Report as Hamilton’s assistant, and through Coxe it demonstrates the influence of Mathew Carey and the mechanics.69 Hamilton was adamant that the transformation of the United States from a predominantly agricultural country into a manufacturing power could not occur under free trade. In fact, foreshadowing many similar nationalist arguments, Hamilton held that international trade was not free given the multitude of restrictions imposed by European countries, including Britain. These restrictions would perpetuate the agrarian structure of the economy, barring

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the USA from enjoying the fruits of industry in the future. In a key passage that would influence much subsequent nationalist thinking, Hamilton proclaimed that: The United States cannot exchange with Europe on equal terms; and the want of reciprocity would render them the victim of a system which should induce them to confine their views to Agriculture and refrain from Manufactures. A constant and increasing necessity, on their part, for the commodities of Europe, and only a partial and occasional demand for their own, in return, could not but expose them to a state of impoverishment, compared with the opulence to which their political and natural advantages authorize them to aspire.70

There was, according to this analysis, an increasing demand for manufacturing items and a diminishing demand for agricultural commodities, thus leaving nations specialising in the latter weakened over the longer term. Given that the future prosperity of the nation was at stake, Hamilton saw a role for government in stimulating (‘exciting’) individual investments in industry. However, he only sought the government to provide the impetus for investment, for example through credit schemes or premiums for inventors.71 He had not developed, as Raymond and List later would, the idea of the potential incompatibility of individual and national interests. He rather believed that private productive powers lay dormant, due to habits or capital scarcity, and that once awakened by the government, market forces would propel the US economy forward.72 Tariffs could play their part by encouraging infant industries – Hamilton provided a detailed list of products and tariff rates in his report – but he prefaced them with a number of caveats.73 Primarily, tariffs should be moderate enough not to jeopardise their capacity to bring in revenue, which Hamilton needed to fund his national debt.74 Import prohibitions could be used in exceptional cases, but his preferred instrument was subsidies (‘bounties’) to promising sectors, primarily those sectors like textiles that could purchase domestic raw materials.75 Hamilton went one step further in welding government and enterprise together by supporting the founding of the Society for Establishing Useful Manufactures (SEUM), a nationwide industrial corporation under the auspices of leading businessmen and Tench Coxe as Assistant Secretary to the Treasury.76 The SEUM was to be a large and hierarchical corporation with ample government support, and its private investors expected to use these advantages to generate profits.77 But this aim was couched in nationalist terms, with the prospectus declaring ‘that community which can most completely supply its own wants is in a state of the highest political perfection’.78 However, it turned out that the SEUM could not even supply the rather limitless wants of its own directors. The operation folded quickly, partly due to the malfeasance of its corporate officers. This exposed the SEUM, and the Report on

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Manufactures with which it was associated, to severe criticism from rank-andfile mechanics, who saw them as get-rich-quick schemes for the elite, rather than as earnest attempts to spur industry.79 Hamilton’s response to this criticism was uncharacteristically muted, and much of the Report was not put up for discussion in Congress, unlike his earlier financial reports. This apparent demurral, coupled with Hamilton’s elitist tendencies and his acquiescence to British demands on trade, has led to some speculation that Hamilton was not actually a nationalist interested in the promotion of American manufacturing, but was attempting to serve the needs of his aristocratic social circle, or even the British.80 Such a position, however, ignores a number of salient facts about the Report and about Hamilton’s general strategic direction. First, many of the tariffs Hamilton proposed in the Report were enacted only five months later. What Hamilton needed was to overcome resistance in Congress. The opportunity arrived when a military emergency on the western frontier demanded that additional funds be raised immediately. Hamilton now quickly passed his planned tariffs, ostensibly to raise revenue.81 Second, the charge that Hamilton did not seek to promote domestic manufactures is unconvincing, despite the almost two years it took the Secretary to prepare the Report. Congress had initially asked for a report on domestic military procurement, which his assistant Coxe duly drafted. It was Hamilton’s own decision to go beyond this initial brief, as well as Coxe’s tepid draft, and provide a much more ambitious blueprint of an American path towards manufacturing pre-eminence.82 Third, despite his clear admiration for Britain, Hamilton flouted British laws when he deemed it in the best interest of US economic expansion. He directed Coxe to secretly import British machinery for the purposes of technology transfer, and encouraged the immigration of highly skilled British mechanics, despite British prohibitions against such acts.83 Hamilton’s caution in offending the British on most other counts stemmed from his desire to avoid war at a time when he did not think the country ready for such a conflict.84 He played a longer game than Madison and Jefferson, who were quicker to resort to aggressive commercial policies. Madison tried to punish Britain by subjecting its shipping to discriminatory tonnage duties, a move Hamilton worked hard to prevent because he feared the repercussions on US trade.85 Madison also wanted restrictions on foreigners buying the stock of the Bank of the United States, while Hamilton saw gains in foreign direct investment.86 Jefferson, for his part, pushed the idea that the United States could, through the use of restrictions on foreign shipping, force these countries to open up their trade to American vessels. For Hamilton, this significantly overestimated the republic’s economic power at the close of the eighteenth century.87 What differentiated both camps was clearly not their desire to defend a national economic community, as they saw it. This was common to

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both. Yet their temporal conception of this community was very different. Whereas Madison and Jefferson’s economic thinking, with their emphasis on agriculture and commercial retaliation, was essentially static, Hamilton’s was dynamic. He sought to create stability for market participants in order to generate the industrial growth that could guarantee American security and independence in the future.

2.4 Nationalism Democratised In the first decades of the nineteenth century, the Hamiltonian proposal was transformed from a pro-growth programme building on a narrow class of financial elites to a broad-based popular movement championing self-sufficiency. Two factors drove this change. The first was the increasing clout of grassroots manufacturing activists. This ascendency of the mechanics was aided by the international political tensions that interrupted trade during this period and inadvertently protected American manufacturing from foreign competition. A second factor militating against Hamilton’s vision was the financial crisis of 1819, which to many Americans illustrated the pitfalls of high finance. Daniel Raymond, one of America’s first economists, wove these trends into a blueprint for a national economy that was to be self-sufficient and profoundly egalitarian. The broadening of the nationalist movement thus led to a hardening of isolationist positions. *

The reception of Hamilton’s economic programmes was decisively shaped by the rapidly developing sectional tensions between Hamilton’s Federalists and the Jeffersonian Republicans. Ironically, Hamilton’s policies of nationbuilding were a prime reason for these divisions. His centralising measures fostered resistance from advocates of states’ rights. Differing conceptions of America’s political economy also reflected the growing antagonism between the agrarian slave-holding South and the free commercial North.88 These divisions were reinforced by the escalating war between Britain and revolutionary France in Europe, which split public opinion in the United States, especially as both countries confiscated American ships and their cargo.89 The old question of how commercial policy should respond to a hostile international environment thus came to the fore again. One of the defining controversies was the Jay Treaty with Great Britain, signed by President Washington in 1795. The Jay Treaty was a typically Hamiltonian project, which established peaceful commercial relations with Britain at a price (limited navigation by American vessels to the British West Indies) that many American patriots considered too high. Madison and

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Jefferson led the fierce opposition to this Treaty, but they were not alone.90 Many protectionist mechanics of the first generation, such as Mathew Carey and even Hamilton’s assistant Tench Coxe, were outraged by the concessions made to Britain. They instead supported the Democratic-Republican position that the United States should reciprocate British trade restrictions to maintain what Jefferson called ‘commercial independence’.91 This development is easily lost in overly stark portrayals of the conflict between ‘industrial’ Federalists and ‘agrarian’ Jeffersonians: ardent manufacturing activists ultimately deserted the Federalist cause – not because they had decided that economic nationalism was a lost cause, but because Hamilton’s commercial policy seemed too moderate! In addition to qualms about moderation, many mechanics also turned away from the Federalist programme because they found Hamilton’s vision of a community of economic elites too narrow.92 Among the activists that populated the manufacturing societies, there was a growing unease with large corporations such as the SEUM, run by Hamilton’s peers, that would obliterate small manufacturers.93 In letters published in Mathew Carey’s The American Museum, George Logan (1753–1821), a prominent Pennsylvania politician, articulated this opposition to helping the rich. ‘Under a vague undefined idea of supporting the general welfare, Congress is permitted to enact partial laws in favour of a few wealthy individuals’, Logan charged, predicting that ‘such regulations will inevitably destroy the infant manufactures of our country, and will consign the useful and respectable citizens, personally engaged in them, to contempt and ruin’.94 Self-sufficiency was important, Logan argued, but it should build on a grassroots movement of true patriots: ‘the success of American manufacturers will not depend on financial calculations, or legislative inference, but on the patronage and encouragement they may receive from patriotic citizens’.95 Mathew Carey himself, ever the champion of the common man, argued that government interference was justified, but only in the form of general tariffs that would offer protection to all craftsmen, rather than Hamiltonian subsidies, which would only advantage elites with close ties to the government.96 Credit, moreover, was not just to be dispensed through centralised institutions such as the Bank of the United States, but should be made available through a network of small banks to middle-class manufacturers too.97 This democratisation of economic nationalism triggered a pivot of especially poorer and middling mechanics to the Jeffersonians by the late 1790s.98 They brought their protectionist positions with them. The turn of these budding economic nationalists towards the DemocraticRepublican Party was eased by the pivot of party leaders themselves towards manufacturing and self-sufficiency. Once they were in power after 1800, both Jefferson and Madison saw their presidential terms dominated by commercial conflict and war between France and Britain. Jefferson’s attempt to steer

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a middle ground between both belligerents by issuing a general trade embargo did not, as he had hoped, force the warring parties into acquiescence.99 Neither did Madison’s subsequent policy forbidding commercial intercourse with those two nations.100 Real and commercial warfare did, however, lessen Democratic-Republican opposition towards developing the home market.101 Trade restrictions had started out as a strategy to force free trade upon America’s trade partners. However, the continuing trade disruptions brought the importance of domestic markets to the fore. Jefferson and Madison now started to see self-sufficiency as an intrinsic goal. The collapse of trade, Madison declared to Congress in 1809, had encouraged domestic manufacturing, so that the republic could now ‘behold a rapid diminution of our dependence on foreign supplies’.102 Jefferson likewise now applauded self-sufficiency, noting that his own embargo had ‘reduce[d] our future demand on England fully by one half’.103 Trade disruptions and sanctions, as they would do on many occasions, decreased the costs of pursuing autarky. Positive attitudes towards manufacturing by Jeffersonian Republicans were strengthened by the fact that domestic industry, itself established as a byproduct of trade restrictions, presented an increasingly powerful interest that could lobby for further aid to manufacturing.104 When the DemocraticRepublican Treasury Secretary Albert Gallatin (1761–1849) was tasked in 1808 and 1810 with writing reports on internal infrastructure and manufactures respectively, his recommendations encompassed a combination of import duties, credit and subsidies to industry, as well as internal improvements to create a national market. This was a thoroughly Hamiltonian project.105 The active involvement of the federal government in infrastructure remained limited to the postal network and the National Road due to constitutional scruples. State and local governments, however, became deeply involved in the networks of turnpikes and canals that increasingly connected Americans.106 Madison enacted another element of the Hamiltonian programme as president by rechartering the Bank of the United States in 1816.107 Nationalist fervour was most apparent when it came to trade policy, especially after the conclusion of the War of 1812 against Britain.108 Once peaceful commercial relations returned, American industry found itself again under pressure from British competition and charges of ‘dumping’ were quickly levied against British competitors by Carey and his protectionists.109 Jefferson, now in retirement, charged that those marshalling free-trade arguments in such a situation ‘cover their disloyal propensities to keep us in eternal vassalage to a foreign and unfriendly people’.110 President Madison reacted with the first explicitly protectionist tariffs in US history in April 1816, which were justified by his administration as safeguarding ‘the influence of domestic manufacturers upon the wealth, power, and independence of the Government’.111 The fully fledged economic nationalist movement that emerged from these years of conflict was, despite significant confluence in terms of manufacturing,

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infrastructure and credit policy, quite different from Hamilton’s prototype. Economic nationalism was now a movement with a broader social base than its predecessors of the early 1790s and it built on participation by smaller producers.112 It also sought to appeal to rural constituencies. One example of such efforts is provided by the activities of George W. P. Custis (1781–1857), an adopted son of Washington and plantation owner, who preached cooperation between farmers and manufacturers. Like George Logan, he admonished large corporations and exhorted the patriotic duty of each citizen to work hard and ‘buy American’. Even the American flag, he told an audience of sheep farmers in Virginia, was manufactured abroad, an embarrassment as ‘we shall ever bear a secondary grade in the rank of nations, if we are not independent of all’.113 Dreams of autarky clearly featured more prominently than they had in Hamilton’s time and with that came, at times, a stronger dose of chauvinism. As early as 1800, George Logan had railed against ‘our commercial towns filled with British Subjects who conduct our trade, with British Agents, who drain our Wealth; with British Politics, British interests, and British Influence’.114 Yet despite the fierce rhetoric, very few commentators sought extensive government intervention, and most emphasised free domestic markets as the best way to raise the common man.115 Trade joined Americans together, who would ‘abandon the ocean, and within ourselves, establish a great mart for all the world to visit’.116 Apart from the use of protective tariffs, self-sufficiency would be driven by the daily consumption choices of ordinary patriotic Americans. Mathew Carey remained one of the driving forces behind the democratisation of American economic nationalism. He was deeply involved in the manufacturing societies that operated in the protectionist heartland of Pennsylvania and provided important networking opportunities for economic nationalists.117 Carey’s convictions were hardened by the financial crisis of 1819, which had led to widespread foreclosures and unemployment across the country. Carey attributed the crisis to an overreliance of the American economy on volatile foreign demand and foreign credit.118 This is reflected in his proposals to disengage the United States from the use of specie, which aided international credit transactions. Instead the country would transit to the use of paper money, which would privilege domestic trade.119 Carey disseminated these views in his pamphlets, the Essays, which he printed and distributed with his own publishing company. Despite his influence as an agitator, however, Carey’s Essays were not of the kind taken seriously by political economists. Haphazardly organised, with liberal use of exclamation marks and plenty of polemic in place of argumentative substance, the Essays were really more a journalistic commentary on current economic affairs than an intellectual basis for the growing nationalist movement.120 The thinker who provided the intellectual crystallisation of mass nationalism into a system of economic theory was Daniel Raymond. Having made

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a rather unsuccessful attempt at a career in the legal profession, Raymond became the first American to write a systematic treatise on economics, the Thoughts on Political Economy (1820).121 America’s first piece of academic economics turned out to be a cornerstone of the evolving nationalist creed. Wrestling with the problem of how to reconcile popular participation in economic affairs with Hamilton’s plan for directed development, Raymond envisaged the transformation of America into a mass society with an interventionist state, but without the extremes of social privilege and wealth that Hamilton had accepted.122 Although only moderately successful initially, the Thoughts went through three more editions, so that Raymond attracted the financial backing of Mathew Carey, who was keen to bankroll promising theoreticians.123 Raymond’s principal significance for the larger development of economic nationalism stems mainly from his conception of the nation, which he in all likelihood bequeathed to Friedrich List (Sections 2.5 and 3.4). As a lawyer, Raymond saw the nation as a legal person that had been formed by its constituent individuals: the ‘nation . . . is an artificial being, or a legal being, composed of millions of natural beings; still it possesses all the attributes of a being’.124 Unlike most contemporaries, however, Raymond held that once individuals had formed this political community, they had to abide by the regulatory will of the nation as it expressed itself through majority rule.125 This justified his methodological nationalism, that is his treatment of the nation as a distinct unit of analysis. ‘A nation is one, and indivisible’, Raymond declared, ‘and every true system of political economy must be built upon this idea, as its fundamental principle’.126 Having defined the nation, Raymond drew a sharp distinction between individual and national wealth and he harshly criticised classical economists, primarily Adam Smith, for allegedly conflating the two.127 For an individual, accumulating land and money would count as wealth, but for a nation what mattered was the capacity to use these assets to grow wealth. This would require government policies, as the interests of individuals and nations were not identical.128 Individual planters in the South amassed wealth through slavery. This was not only morally abhorrent, Raymond stressed, but slavery also depleted national wealth as it eroded incentives for work and industry.129 In this and many other cases, the government was permitted to override individual property rights and channel individual action towards the national good. Individual rights were always conditional, for a nation is like ‘the army [which] is ONE, and the general the head; no soldier is permitted to have a right, or an interest, opposed to the general good of the army’.130 The aim of the government as the army’s general was the growth of national wealth. It’s main tool on this path was the mobilisation of labour, which Raymond thought was chronically idle, an assumption possibly reflecting his own experience as an unemployed lawyer.131 Increased employment would

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create stimulating effects throughout the economy; demand would increase and consumption would be revitalised. As long as the government continually stimulated effective demand, thus preventing an oversupply (‘glut’) of goods, growth would be recurring. Raymond’s list of stimuli included the provision of public works and internal improvements, public debt and the stimulation of manufacturing, and finally tariffs.132 He supplemented this with a defence of income redistribution, which he believed would increase overall consumption and hence growth.133 Raymond’s theory of growth was based on the unrealistic assumption of a continually expanding labour supply, and his proto-Keynesian program of stimuli did not prize in the costs of an overheating economy. This did not concern Raymond, who was quick to point to the additional benefits derived from employment creation. Internal improvements would further unify national markets. The redistribution of income would foster a more equal and therefore more cohesive national community.134 Tariffs increased certainty in times of crisis – the impact of the 1819 crisis can be seen here too. ‘[T] his nation is at present groaning under distress, caused by a fluctuation in the demand for labour’, Raymond conjectured, ‘this is always liable to be the case, when the consumption depends on a foreign market’.135 Finally, tariffs were a way in which productive capacity could be built up with benefit to the community in the long-term. This future transcended the short-sightedness of individuals, because ‘[t]he schemes of the former [the legislator], may be adapted to the life of the nation, to which no limit can be fixed’.136 Like Hamilton, to whom he owed a lot, Raymond thus prioritised a long-run view of the economy.137 Yet his scheme involved the participation of a vastly more extensive group of economic agents than Hamilton’s small circle of elites – every member of the national community had their role to play as labourers, consumers or small-time investors. Raymond’s vision of community was expressed in vivid language praising the common man and assailing the rich and powerful, who had risen to their station through skewed property rights and protected privilege.138 The epitome of licensed greed and privilege were private banks ‘who prey upon the public, with a view to make good their losses’.139 This was a position close to that of Mathew Carey and similarly reflects the distrust bred by the financial crisis. Raymond was equally clear about his rejection of European hierarchies and any attempt to establish their surrogates on American soil.140 Raymond’s policy prescriptions – internal improvements, tariffs, public debt – were to be the programme of Henry Clay, who would infuse these ingredients into his American System.141 This programme would serve as the rallying cry for nationalist policy makers for the remaining antebellum era and Raymond explicitly threw his weight behind it in a 1828 pamphlet.142 The American System therefore deserves close study, but before doing so it should be borne in mind that Clay and his followers did not have an intellectual

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monopoly on interpreting nationalist writings. Raymond’s community of the common man and his aversion to banks are elements that would later become central to Jacksonian democracy. Named after President Andrew Jackson (1767–1845), this movement is not commonly associated with economic nationalism, because it opposed Clay’s tariffs. Yet Raymond’s anti-elitism suggests that economic nationalism had a much broader remit than trade policy by 1820 and that much of it was equally fundamental to Jacksonian visions of America.143

2.5 The American System Daniel Raymond was a good economist, but making reality out of his theory required political support. This was provided by Henry Clay, the foremost American protectionist politician of the early nineteenth century. Clay recognised the value of a coherent programme to advance his project of national unification. More prosaically, nationalism allowed him to forge a useful coalition of otherwise divergent political interests. The nationalist programme Clay designed was the American System, a policy package combining tariffs, infrastructure and banking, in addition to some gifts to property holders. In order to make the case that this package amounted to more than just pork-barrel politics, the supporters of the American System received intellectual assistance from abroad in the person of Friedrich List. *

On 30 March 1824, Henry Clay of Kentucky, Speaker of the House of Representatives, delivered a speech on the floor of the House that would signal a new phase in the evolution of the economic nationalist movement.144 The economy had not recovered from the financial crisis of 1819, Clay claimed. Quite the opposite, ‘general distress . . . pervades the whole country’, of which deflation was the most vicious sign.145 This had in turn led to a build-up of household debt and foreclosures.146 Clay was quick to point to the cause of the crisis: ‘we have shaped our industry, our navigation, and our commerce, in reference to . . . foreign markets which no longer exist; in the fact that we have depended too much upon foreign sources of supply, and excited too little the native’.147 In the face of the vagaries of world markets, the only remedy was to replace the current ‘foreign’ system with a ‘genuine American system’.148 The core principle of the American System was to be the home market on the demand side and home production on the supply side. The American system, in other words, came close to a circular system of domestic self-sufficiency, limiting both imports and exports.149 Clay enumerated the advantages of isolation: it

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would create certainty for American producers, aid national security, increase employment for American workers and eventually even decrease prices for consumers.150 Fortunately, the required policy instruments were quite familiar to Americans by now, encompassing high tariffs on the outside, as well as federally funded internal improvements and a national system of credit provision on the inside.151 Clay’s programme was clearly not original. Raymond had provided much of the rationale, as had Mathew Carey (Clay admitted as much in his speech).152 Clay’s importance lay in his position as a populariser and implementer. As an astute politician, he recognised the electoral potential of combining tariffs, credit and infrastructure into a single policy platform. The tariff appealed to the Mid-Atlantic states, with their budding industry. Banking and credit remained centred in the northern states. Finally, internal improvements were popular in the West, where remoteness made investments in roads and canals a priority. This coalition was needed to outmanoeuvre the slave-holding South, which depended on foreign markets for its plantation cash crops.153 The American System also built on the support of middle-class voters as an interest that cut across state lines. These voters were to a lesser degree represented by Andrew Jackson’s more plebeian Democrats. Clay’s emphasis on maintaining property values against the deflationary trend appealed to their preferences.154 For the same reason, Clay’s American System encouraged federal price regulations to limit the sale of Western lands. Free and rapid settlement of these lands, Clay and his supporters feared, would depress the property values of the middle classes. Moreover, new settlements would create millions of new farmsteads, thus limiting the supply of labour to industry.155 Reminding his base of the dangers of a ‘demoralization of society’, Clay stressed that secure employment of the destitute classes in manufacturing was key to avoiding ‘idleness and vice’.156 At the same time, large industrial establishments should be avoided – less America descend into the squalor that had characterised British industrialisation.157 This could be avoided by focusing production on the home market instead of exporting. The home market would offer ample new economic opportunities for medium-scale enterprises and their middle-class entrepreneurs.158 Clay’s coalition was clearly a coalition of interest groups. His achievement lay in encasing this political coalition within a unifying national discourse. The American System, as he liked to emphasise, stood above sectional interests and represented the majority, the interests of the whole that was larger than the sum of its parts. Political horse-trading aside, Clay was an ardent believer in national unity who believed that an activist federal government would cement citizens’ attachment to the Union.159 For Clay, an integrated home market would lead to ‘the creation of reciprocal interest’ between American producers and consumers, eventually coalescing into a national economy of ‘affinity and consanguinity’. It is indeed doubtful whether the American System’s

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individual elements would have commanded the legislative or popular support they enjoyed as part of the package.160 This was recognised by Mathew Carey and his followers, who threw their support behind Clay’s coalition. As the influential protectionist publisher Hezekiah Niles (1777–1839) told Clay: ‘In times like these national men must not all quit the field. The liberality & broadness of your views . . . are inestimably valuable just now. The legislation or direction of the public affairs seems to regard a quintal of codfish, a hhd. of tobacco or a bale of cotton, instead of keeping an eye to the whole.’ (Niles wisely avoided mention of hemp, in which Clay himself had a major financial stake.)161 Clay’s strategy was met with initial success when the tariff proposals of 1824 for which he had campaigned passed into legislation. Nonetheless, the American System aroused fierce opposition from southern delegates, who saw it as naked interest group politics rather than a unifying national project.162 The defenders of the American System had to ramp up their marketing strategy. Despite Clay’s emphasis on ‘consanguinity’, they did so by procuring intellectual support from two immigrants: John Rae (1813–93) and Friedrich List. This was done on purpose. As foreigners these thinkers were less likely to be blemished by association with one of the many vested interests jostling for control of American trade policy. Foreign expertise could bestow objectivity on the nationalist cause. John Rae was a Scottish polymath whose travels in the undeveloped Canadian ‘backwoods’ had convinced him that spontaneous interaction between individuals would not be enough to ensure capital accumulation and consequently economic growth. Especially in a new nation such as Canada, with its high need for infrastructure investment, this private desire for accumulation would not correspond to what was optimal at the national level.163 This chasm was wider ‘the more the state of feeling . . . pervading any community separates individuals from one another’. What was needed was a strong feeling of national community: ‘though individuals perish, the race remains, the more the interests of the community are identified with those of others, the wider will be the circle of events which the accumulative principle will comprehend’.164 Nationalism was the antidote to slow capital accumulation. Rae was consequently invited by nationalist circles to the United States so that he could publish his work in Boston, where it appeared in 1834. However, Rae’s vision of economic community was more abstract than his political backers, who were mainly interested in protectionist tracts, had hoped for. The book languished in relative obscurity.165 Friedrich List’s stay in the United States would prove to be of greater consequence than Rae’s brief sojourn. List, a former civil servant and professor of public administration from the German Kingdom of Württemberg, had gained notoriety in the German lands as a political agitator.166 In 1819, he had been the driving force behind the foundation of the first All-German Business

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Association in the mercantile city of Frankfurt, the former ‘capital’ of the bythen defunct Holy Roman Empire. The Association’s prime goal was the removal of customs barriers between the German states, which were a serious hindrance to trade. For the young List, the creation of a unified market was the first step towards German political unification, a goal many of his bourgeois supporters shared. List also advocated the creation of a common German external tariff to retaliate against the barriers erected by other nations.167 Apart from his activity as an economic nationalist, List also displayed his impeccable credentials as a democrat and liberal when, elected to the Diet of his native Württemberg, he started to campaign for constitutional reforms and citizens’ rights. Both Pan-German nationalism and political liberalism were anathema to the authorities at the time, so that List was imprisoned on charges of treason and subsequently forced into exile.168 In Paris, List met the Marquis de Lafayette, who had already introduced Mathew Carey to life on the other side of the Atlantic. List thus chose to emigrate to the United States in 1825, where he embarked on a tour of the country with Lafayette. The excellent connections of the Marquis into the highest circles of American political life put List into contact with, among others, John Adams, Thomas Jefferson, John Quincy Adams and Henry Clay.169 List was impressed by the spirit of democratised nationalism in the States and wasted no time acquainting himself with local protectionist circles. An invitation to contribute to the Pennsylvania Society for the Encouragement of Manufactures and the Mechanic Arts, Mathew Carey’s influential protectionist association, soon followed.170 The Society was looking for someone with List’s intellectual firepower in the battles leading up to the tariff bill of 1828.171 In this capacity, List wrote a series of letters to the Society on the topic of protective tariffs that were subsequently published as the Outlines of American Political Economy (1827). The Outlines offer a fine example of List’s ability to tailor his writings to a specific audience. Although treating matters of trade generally, List applied his arguments to the contemporary situation of his new host country and directed them specifically against the writings of Thomas Cooper, Adam Smith’s American ‘disciple’.172 More importantly, it is in the Outlines that List first systematically sketched his argument for the economic importance of the nation. Whereas his previous writings had been journalistic polemics, it was through his contact with American thinkers that he recognised the need for a theoretical foundation.173 ‘It is theory, sir, which furnishes to the opponents of the American system the intellectual means of their opposition’, he declared, and exhorted his new compatriots ‘to lay the axe to the root of the tree, by declaring the system of Adam Smith and Co. to be erroneous – by declaring war against it on behalf of the American System’.174 In the United States, List thus aimed his martial rhetoric away from the parochial princes whom he had battled in the German lands, and towards targets with global

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visibility: Adam Smith and British trade policy. The preoccupation with Smith may reflect the influence of Raymond’s work, which List likely read in preparation for the Outlines, while the focus on the purported British threat had long been an intellectual staple of Mathew Carey’s manufacturing discourse.175 A reading of the Outlines against his later and more influential National System highlights three more American influences on List’s thought. First, the Outlines already contain List’s tripartite division of political economy into individual, national and cosmopolitan economy, with the attendant charge that Smith had been ignoring the centrality of national economy.176 The nation, according to the American List, is primarily a legal person, rather than the organic composite envisaged by German thinkers (see Section 3.3). This accentuates the vital position of List’s American stay, especially his purported reading of Raymond, in the development of his creed.177 Once again mirroring Raymond, List argued that the nation had a right to override individual decisions, because the laws governing individual and national welfare differed.178 This idea has subsequently become a staple of nationalist thinking on the economy. It is equally important to note what List did not adopt: whilst Raymond’s conception of national personhood was based on a constitutional theory of majority rule, List’s exported creed would omit any reference to the democratic origins of nationhood.179 Second, the List of the Outlines believed that national welfare was in constant conflict with global ‘cosmopolitan’ welfare, because the global economy was an arena of war. Military security, as well as unfair foreign trade practises, are List’s paramount motivations for protection.180 List’s defence of the American System therefore reads in parts like an update on Hamilton’s 1791 Report, albeit with fiercer rhetoric.181 List did not yet, as he would later, systematically attempt to square the circle between the interests of the nation and humanity at large, giving the Outlines a much narrower focus. Finally, we see in the Outlines evidence of List’s talent to buttress theoretical arguments with empirical observations drawn from his knowledge of commercial policy. This led him to emphasise that the specific national context determined optimal economic policy.182 List would later emphasise the influence of his practical experience in the United States on his dynamic view of economic development: ‘Here before one’s eyes, wildernesses become rich and powerful states. Here it first became clear to me that nations pass through different stages of economic development. A process which in Europe would require many centuries takes place here under our very eyes.’183 American dynamism, not the stifling stasis of the German states, showed List the possibilities open to nations embarking on the road to expansion. Intellectual germination was a two-way process. With List, American economic nationalism gained a theoretically sophisticated proponent of protectionism – one more attuned to the practicalities of commercial policy than Raymond had been. The movement also gained someone

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who could draw on a knowledge of European economic debates, someone who could quote French protectionists to marshal wider intellectual support for the American System (Section 3.2).184 The irony was not lost on the System’s critics, one of whom quipped in the House of Representatives that ‘[w]e appear to have imported a Professor from Germany, in absolute violation of the American system, to lecture upon its lessons’.185 However, it was exactly List’s status as a foreigner, which left him untainted by the sectional controversies polarising US politics, that added to the impact of his defence.186 The Outlines were most likely commissioned in preparation for the AllAmerican Harrisburg Convention of Manufacturers. This was a centralised gathering of proponents of the American System, modelled with some theatrical gusto on the 1787 Constitutional Convention.187 The issue of the tariff loomed large over this Convention, as it did throughout 1827 and 1828. In this atmosphere, List’s Outlines were widely read and influential in American political circles. List carried on authoring public statements on behalf of the Pennsylvania Society in its lobbying of Congress, while also writing as a journalist.188 For List personally, his political activities bore fruit when he became a naturalised American citizen in 1830, and was made US envoy to the German Duchy of Baden by President Andrew Jackson.189 Despite eventual passage of the tariff bill in 1828, Clay’s national vision did not emerge the political machinations leading to its passage unscathed. The tariff would enter history as the ‘Tariff of Abominations’, reflecting both its tortuous legislative enactment process, as well as its divisive content. As a result of Congressional horse trading, the tariff also raised duties on raw materials, diminishing support for the bill even from Carey and other manufacturing supporters.190 Nonetheless, tariffs kept rising and Clay could claim victory on this basis in an 1832 speech, this time in the Senate, arguing that his tariffs were responsible for the growth of the American economy.191 Clay’s influence in US politics throughout much of the first half of the nineteenth century ensured the passage of a number of protectionist tariffs. This policy became one of the corner stones of the National Republican and Whig Party platforms. Other crucial elements, mainly the Bank of the United States and federal infrastructure improvements, were vetoed by President Jackson, ostensibly on grounds of constitutional concerns.192 Over the long term, the American System would outlive its creator and become part of the policy consensus after the Civil War.193 In the short term, however, its effect was divisive. Southerners judged their interests to be threatened by the coalition arrayed against them, and resentment between the sections grew. The agitation reached its apogee in the Nullification Crisis of 1832–33 when freetrading South Carolina attempted to defy Clay’s tariff, thereby contravening federal law.194 Instead of fostering national unity, Clay’s American System had

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highlighted the Union’s political divisions, which would only deepen in the years to come.

2.6 Henry Carey and the Harmony of Interests Tariff issues became less prominent in the American debate after the Nullification Crisis of 1833 because sectional tensions between slaveholding and free states precluded advancing the controversial issue of trade policy. That did not mean that the supporters of the American System had abandoned their project.195 Rather, economic nationalism underwent another mutation, now recasting itself as an ideology of harmony that balanced sectional interests. This was the work of Henry C. Carey, son of Mathew Carey. The younger Carey completed the shift in nationalist discourse from a focus on expansion towards a preoccupation with domestic inequality that had already been underway since Raymond. Carey blamed the political polarisation of antebellum society on an exposure to international trade and successfully called for a staunchly isolationist programme. He consequently argued that this isolation would usher in a ‘Harmony of Interests’ within the United States. Yet economic nationalists were ambiguous to what degree this harmonious community should include immigrants and racial minorities. While they were generally willing to welcome immigrants on account of their alleged economic contributions, the ethno-centric designs of many nationalists excluded African Americans. *

Henry Carey inherited not only his father’s wealth and publishing house, but also his Anglophobia, fierce nationalism and protectionist connections.196 Just like Henry Clay, he was not a detached observer when it came to trade policy, but had financial interests in industries whose protection he demanded. He also frequented the social circles of the Philadelphia industrialists who had a stake in safeguarding their markets. Yet Carey realised, as Clay had done, that the era of the Hamiltonian gentleman capitalist had long passed, so that calls for protection needed to be embedded into a broader national narrative.197 This implied, first, the need to showcase the advantages from a protective system that would accrue to labour. Second, Carey’s writings tapped into a deep-seated anxiety about the future of the Union and the conflict that sectional policies such as tariffs could provoke.198 Carey was therefore at pains to stress that none of America’s many interest groups would loose from protection. One of his best known works, published a decade before the Civil War, stressed that only protection would guarantee ‘perfect harmony of interests throughout the Union, and among all its people’.199 Protection

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would aid Americans in building prosperous, almost self-sufficient, communities in which mutual interactions would transcend sectional divisions.200 Unlike Clay, and quite unlike his father, the younger Carey was a well-read economist and prolific academic writer, whose work attempted to span the social sciences. He was not afraid to devise his own theoretical basis for this national Harmony of Interests.201 Like many nationalists, Henry Carey based his theories on a critique of the division of labour that would occur under free trade. Hamilton and List had held that free trade divided the globe into an industrial Britain and an agrarian rest. Carey followed their lead. The British, he complained, had monopolised the industry of the world and were now using their market power to decrease primary commodity prices and raise the price of manufactured goods. In effect, they were taxing farmers in the United States and elsewhere.202 If one had any doubt about British intentions, one only had to examine the fates of Ireland and India, Carey claimed, colonies whose prosperity had been eroded by a British-led division of labour and a British stranglehold on world prices.203 Carey’s insistence that the British controlled the global price level was a new (if conspiratorial) addition to the nationalist canon, but the remainder so far was standard fare. Carey’s real novelty lay in connecting trade to the division of labour within the United States, and the implications this held for national unity. British colonialism and subsequent free trade, he argued, had encouraged large parts of the country, especially the cotton-producing South, to specialise in cash crops for British markets. The South was thus bound to the interests of its foreign trading partners. The problem was magnified by the disproportionate focus on agriculture within the USA, Carey complained, which had dispersed the American population thinly over an immense area. High internal transport costs meant that Americans did not come into contact with each other, thus forming no union of interests at home.204 Predictably, the only way out was a tariff, the panacea for all of America’s ills. It would encourage manufacturing, including in the South, thus releasing it from allegiance to British customers. There would fewer farmers, so that the remainder would benefit from increasing land prices and from feeding industrial workers.205 Carey was not circumspect about tariff rates, as Hamilton had been. Manufacturing, he argued, relied on complex value chains including raw materials, and each link in the chain required extensive protection for the benefit of whole.206 Most importantly, industrialisation would encourage more compact settlements, where ‘the loom and the anvil . . . take their natural places by the side of the plough and the harrow’.207 Long-distance trade, with its wasteful high transport costs would be replaced by local interactions. As transport costs were saved, Carey believed, domestic commerce would actually pick up. Profitseeking middlemen would be cut out by direct contact among buyers and

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sellers.208 Within such tightly knit local communities, the benefits of ‘powers of association’ could take hold. Americans would communicate more with each other, as consumers, producers and neighbours.209 Fraud, which Carey held to be endemic in long-distance trade, would be replaced by mutual trust, spurring credit provision. Spending time at home with one’s family and peers instead of travelling the world would create intellectual communities.210 Peaceful compact populations would decrease the costs of law enforcement, making a smaller-sized government possible. Cooperation would replace conflict as balanced local communities would mean that the nation, as the supreme community, was self-sufficient and in harmony with all its parts.211 Protection would also save Britain itself from misery. Here Henry Carey drew upon critiques of British ‘pauperism’ that were becoming widespread in the nineteenth century. According to these, Britain’s role as the workshop of the world meant that its labourers were overworked and poorly paid. Exploiting labour allowed the British to flood world markets with their products to undercut competition.212 ‘The apparently cheap clothing is very dear. It is obtained at the cost of much labour, and of little value when obtained’, Carey observed, predicting that the ensuing race to the bottom in labour standards would depress wages everywhere.213 Nationalists across the globe therefore needed to work together to ensure the welfare of workers through protection.214 Carey’s ambition to show that every imaginable interest would benefit from tariff protection gives his work a forced and at times almost quaint quality. His utopia was not, as Hamilton’s or List’s visions were, a bold imagining of an era to come, but rather a harking back to an imagined past of communitarian decentralisation that had little in common with the accelerating pace of mid nineteenth-century globalisation. Posterity has therefore not been kind to Henry Carey, first subjecting his ‘nationalist bias’ to fierce academic criticism, before eventually forgetting about him altogether.215 He did, if often haphazardly, broach many topics that classical economists had neglected: the spatial distribution of economic sectors, the relationship between transport costs and trade, as well as the benefits of agglomeration. These topics were not successfully tackled in the economics discipline until the early 1990s.216 Whatever his long-term academic influence, Carey was taken very seriously in his own time, with Karl Marx describing him as ‘the only American economist of importance’.217 Marx had a point, for we will see Carey’s influence in contexts as diverse as Meiji Japan and interwar Argentina (Sections 4.5, 6.2). As a publisher and businessperson of extensive connections Carey was furthermore decisive in popularising the American System in Europe.218 In the United States, his vision of a harmonic utopia resonated in times of sectional crisis and he invested heavily in extending his intellectual influence. He founded his own school of thought, which could take no name other than

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the ‘American School’. Its disciples continued to extol the domestic market for much of the nineteenth century.219 Carey’s most important legacy was his imprint on a new political party that was rapidly gaining popularity: the Republicans. Founded in 1854 mainly as an alliance of anti-slavery forces, Carey was instrumental in adding protectionism and domestic market integration to the nascent Republican platform.220 Carey leveraged his academic pedigree and political connections with lawmakers to such an extent that sections of the Committee Report accompanying the 1857 tariff bill were directly copied from his Harmony of Interests.221 This persistent lobbying in the press and in Washington earned him the epithet ‘The Ajax of Protection’.222 Yet Carey’s finest hour came when the secession of the southern states led to the withdrawal of their traditionally free-trading lawmakers from the Senate.223 Having become a principal economic adviser to the incoming administration of Abraham Lincoln, Carey wasted no time in staffing Lincoln’s office with his own supporters.224 As a young politician in the 1830s, Lincoln himself had already been a supporter of Clay’s American System.225 Lincoln now became a reader of Henry Carey’s work, soliciting his advice and absorbing the main policy elements of his programme. The Morrill Tariff of 1861, which initiated a long climb in US tariff rates over the next fifty years, was a reflection of Carey’s influence. Lincoln also supported further tariff bills while in office.226 While these tariffs were primarily motivated by the need to finance the Civil War, Careyite lobbying nonetheless influenced their protective direction. Moreover, subsequent peacetime Republican administrations largely followed Lincoln’s lead until the start of the twentieth century.227 Although the debate over protectionism would still be raging in Congress, the balance of power in the United States was now firmly on the side of the American System.228 The obvious irony that it took a civil war to push Henry Carey’s ‘perfect harmony of interests’ unto the statute books is instructive regarding the ultimate failure of American nationalists to speak for the entire economic community. Henry Carey’s long enumeration of interests he sought to defend invites another, in many ways more fundamental question: which were the interests Carey and his fellow economic nationalists did not see as worth defending? The external demarcation of their imagined communities is irretrievably intertwined with the general nature of American nation-building in the antebellum era. It is clear that this nation-building was not wholly based on a ‘civic’ nationalism, where one could attain membership in the nation solely through shared political ideals. Notions of race, gender, cultural heritage and religion mattered in determining full membership in the American nation.229 The degree to which economic nationalism has contributed to these restrictive conceptions of American nationhood is more ambiguous. It can be argued that, as economic nationalism democratised in the early nineteenth century, the erasure of horizontal hierarchies led to the reification of racial

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boundaries.230 As shown below, this describes the attitude of some economic nationalists, most notably Henry Clay and Mathew Carey, who sought to exclude black Americans from the national community. In general, however, there seems to have been no clear-cut association between arguments prioritising self-sufficient economic communities and those favouring ethnic, racial or religious exclusion before the Civil War. Arguments for such exclusion were frequently made, but they were not predominantly motivated economically. Debates surrounding migration are a case in point. Many pioneers of economic nationalism, such as Hamilton, Coxe or Mathew Carey favoured immigration, which they interpreted as a sign of the vitality of the domestic economy. They also coveted the skills migrants would bring, which would contribute to the strength and welfare of the nation. Hamilton’s circle even arranged for the Report on Manufactures to be printed in Dublin to encourage Irish workers to seek work in the USA.231 It is true that during the late 1790s, Hamilton’s position on immigration hardened considerably, and he was likely one of the main instigators behind the Alien and Sedition Acts, which considerably raised the naturalisation requirements for foreigners wishing to become American citizens. Hamilton did not arrive at this hard-line stance because he had changed his mind about the economic benefits of migration, however. His increasing xenophobia primarily reflected his paranoia about the political reliability of new migrants, whom he branded as radical revolutionaries.232 A similar tension between migration as an economic good, but as a political threat, can be observed in another wave of nativism that engulfed the USA. The 1850s saw the rise of the xenophobic American Party, also known as the ‘Know-Nothing’ movement. At the origin of this movement was a complex set of motivations, but most dominant was a long-standing anti-Catholic sentiment that surged as Irish immigration picked up from the 1830s onward.233 Nativists disparaged the ability of Catholic Irish to contribute to American political culture, often citing their supposed cultural distance to Protestant Anglo-America.234 Economic factors did certainly play a role too, as Irish migrants tended to be poorer and some nativists, many of whom were urban craftsmen, feared downward pressure on their living standards and social status.235 Nonetheless, their movement couched its argument in cultural and political rhetoric, rather than socioeconomic arguments, by arguing that poverty and culture made new migrants unable to vote responsibly.236 Some nativist leaders, while demanding that poor immigrants be denied political rights, advocated that their capacity to own property and conduct transactions be kept intact, so as not to endanger the usefulness of immigrants to economic production.237 Similarly, as much as they railed against foreign trade and British domination, much of the protectionist Whig establishment in the northern states, including their champion Henry Carey, acknowledged the economic benefit of migration to a still-expanding United States.238

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Moreover, for many nativists, the exclusion of Catholic migrants did not necessarily correlate with a strict exclusion of other groups from the community. Some Know-Nothing groups decried America’s ‘peculiar institution’: slavery.239 Criticism of slavery was widespread in the North, where both nativists and old protectionist Whigs had their electoral stronghold.240 Many promoters of the American System opposed slavery on moral, but also on political and economic grounds. Raymond’s argument that slavery enriched southern planters at the expense of economic growth has already been noted. Expansionist nationalists, including Hamilton, generally associated slavery with political backwardness, inefficiency and agrarian poverty.241 Henry Carey, rather disingenuously, blamed the British for the persistence of slavery in the USA, arguing that free trade had depressed food prices, thereby allowing the maintenance of inefficient slave labour. Protection, he argued, would raise food prices and erode the profitability of slavery.242 Other economic nationalists occupied more ambiguous and shifting positions on the issue of slavery. Henry Clay, a slaveholder himself, expressed his dislike for the institution. Yet he often attempted to appease southern slaveholding interests in exchange for their support on policies related to the American System.243 Mathew Carey also initially attempted to reconcile slavery with the American System in the 1820s, fearing that broaching the topic would jeopardise national unity. After the intransigence of South Carolina in the Nullification Crisis, he abandoned this approach and advocated an economic community of free men without the Southern states.244 It is crucial to emphasise, however, that whatever distaste economic nationalists felt for the moral horrors and economic inefficiencies of slavery, they rarely showed a willingness to build an economic community that encompassed free black workers. Mathew Carey’s community of free men was a white community.245 Clay likewise emphasised the alleged incompatibility of free black Americans to live and work in unison with whites.246 (In this, he echoed many of the racist prejudices Thomas Jefferson had expressed at the close of the eighteenth century.)247 Unsurprisingly, Clay and Mathew Carey found it hard to reconcile their advocacy of racial separation with their defence of national unity. The only way out of this predicament they could envisage was the gradual emancipation and subsequent resettlement of free black Americans to Africa. The road to the harmony of interests, in other words, was the removal of a part of the population with possibly divergent interests or identities.248 To this end, Clay co-founded the American Colonization Society in 1816, and pledged to use proceeds from federal land sales to fund colonisation in Liberia.249 This was intimately related to Clay’s American System. For one, the emigration of America’s black population would create a more homogeneous national community in the United States. This exodus would also raise the wages of white workers and limit competition for land.250 Secondly, the colonisation of Liberia would effectively provide the United States with a base on the African continent,

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supplying the mother country with raw materials and spreading its influence.251 The American System would have gone global. This was not a fluke, and Clay expressed his global ambition for the American System on multiple occasions. When he first used the term in a 1820 speech, he was not referring to tariffs, internal improvements or the national bank, but to the political relationship of the United States with the emerging Latin American republics.252 Clay envisaged a system of republics for the American hemisphere free from European colonial rule and influence. This vision deservedly won him many friends in Latin America, but it was also a vision that was perfectly consistent with a leading economic role for the United States within the hemisphere. ‘It is in our power to create a system of which we shall be the centre, and in which all South America will act with us’, Clay dreamed, ‘in respect to commerce, we should be most benefitted’.253 Clay’s hemispheric system and Clay’s economic nationalist system are closely linked.254 The hemispheric system would still be protected by tariff walls, Clay stressed, but these walls would now encompass all of Latin America too. This would effectively have granted the United States privileged access to markets within the hemisphere.255 US cotton fabrics, Clay observed, were competitive in South America and the importance of these exports would grow in the future.256 When it came to the economic potential of the new countries themselves, he praised the capacity of Mexico and Chile to grow wheat.257 The economic relationship between the USA and the rest of the hemisphere would therefore be that between a manufacturing power and a group of raw material producers: ‘In relation to South America, the people of the United States will occupy the same position as the people of New England do to the rest of the United States. Our enterprise, industry, and habits of economy, will give us the advantage in any competition which South America may sustain with us.’258 Clay’s continental dreams, of course, remained largely that, and he never instituted an American economic empire. Many newly independent South American republics gave precedence to economic relations with Britain.259 Mexico, under the conservative minister Lucas Alamán (1792–1853), showed little inclination to remain a primary products exporter and took steps in the early 1830s to encourage a manufacturing sector of its own, one of the first of many Latin American countries to do so.260 Still, Clay was not dreaming alone, and many US economic nationalists veered on occasion into sketches of economic empire. Henry Carey advocated ‘the annexation of the land and the people of Canada, and the other British possessions’ largely because of the market this would provide.261 The publisher Hezekiah Niles, one of Mathew Carey’s comrade-in-arms, was keen to emphasise the importance of Latin American markets to an expanding US industry, despite the importance he placed on ‘self-sufficiency’ when describing relations with Europe.262 The tendency to combine isolation and territorial expansion would come fully to the fore in European economic nationalism.

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3 The Birth of the National Economy in Europe, 1789–1860

3.1 Introduction European nationalists in the early nineteenth century reacted to incipient industrialisation and the rise of Britain as a trading power in ways that differed from American economic thinkers. We can roughly group these reactions into three strands that reflect not only differing local economic conditions, but also different ways in which global intellectual trends were perceived and adopted. In central Europe, Romantic philosophers such as Adam Müller (1762– 1814) and Johann Gottlieb Fichte (1779–1829) resented both industrialisation and international trade, because they believed that these forces would disrupt the traditional social order and lead to domestic political conflict. They also believed that globalisation would erase the cultural distinctiveness of their German-speaking communities. Their fears were heightened by the perceived inability of the fragmented German states to resist either French military invasion or British economic dominance. The Romantics therefore prioritised ethno-linguistic and monetary unity as well as strict isolation from the world economy. The Romantic reaction provided a template for later conservative movements, who in their distrust of industrial modernity were content with, and even welcomed, economic stasis in isolation.1 French economic thinkers were more receptive to the need to catch up with British industry. However, like the German Romantics, they also worried about the adverse effect of trade and industrialisation on national unity. Policy makers such as Jean-Antoine Chaptal (1756–1832) attempted to assist manufacturing growth through industrial policy, but they needed to balance this objective against the challenge of containing political unrest sparked by economic inequality. A later generation of politicians, led by Charles Dupin (1784–1873), believed that tariffs could mend these domestic inequalities. This gave rise to the view of the nation as a community of economic solidarity, where ‘national labour’ needed to be protected against wage pressure emanating from British industry. The French protectionists were among the first nationalists in Europe to prioritise domestic equality.2 44

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The third group of nationalists tried to take the bull by the horns. Friedrich List (1789–1846) fused elements of American, French and German intellectual traditions into the most enduring analysis of the nation as a vehicle for industrialisation. List’s work derived its impact from its combination of theory with empirical observation, its focus on the practicalities of policy and finally its universally transferable message of economic progress. The key contradiction in List’s work was the unresolved tension between expanding the markets available to large nations and preserving the economic independence of smaller nations. List insisted that voluntary associations of nations could combine market size with protection, but his ideas could similarly be read as providing a justification for territorial expansion.3 The examples of Hungary and Poland demonstrate the practical challenges of building economic nations in central European regions marked by imperial competition and contending nationalisms. Moreover, the efficacy of both Listian and isolationist policies in early nineteenth-century Europe was constrained by limited grassroots support. This was true not only because liberal alternatives still seemed attractive, but also due to the lack of participatory options in most continental European polities. Indeed, the lack of democratic institutions that could have channelled discontent in non-violent directions lies behind the obsession of elites in France and Germany with safeguarding the social order through economic isolation.4

3.2 Economic Equality and the French Nation Although the importance of American and German thinking on economic nationalism is generally acknowledged, the role of French thinkers has often been neglected. This omission is particularly unfortunate. French protectionists had a strong influence on the work of Friedrich List, who often visited the country and interacted closely with its leading figures. Most importantly, French policymakers developed a unique way of thinking about the effect of international integration on national community. They predicted that trade would lead to domestic inequality, which in turn would threaten national unity. There are two reasons why French policymakers were particularly concerned about the relationship between trade and inequality. First, the aversion to inequality was part of the legacy of the Enlightenment and the French Revolution. In his Discourse on Political Economy (1755), JeanJacques Rousseau had concluded that it was ‘one of the most important functions of government to prevent extreme inequality of fortunes’ in order to maintain ‘good morale, respect for the laws, patriotism and the influence of the general will’. Appealing to the writings of Rousseau, French thinkers reasoned that globalisation would undermine economic equality and hence patriotic values. The connection between equality and citizenship became part of the progressive legacy of the Revolution.5

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Second, many members of the propertied classes feared that trade would depress the living standards of the labouring masses, which could lead to another revolution. A renewed descent into revolutionary chaos would threaten the position of the wealthy elites. It would also undermine the political stability of the French state and threaten the modest gains made by the French economy.6 Inequality was therefore resented both on progressive and conservative grounds. Both camps had reason to oppose free trade, as long as the connection between trade and inequality was firmly established. *

French thinkers had not always associated inequality with international integration. Before the Revolution, many liberal reformers had written positively about free trade. This was a reaction to the economy of the Ancien Régime, with its web of privileges, licenses and prohibitions that were upheld by corporate bodies and feudal institutions. This system was both rigid and inherently unequal.7 Reformers, including those who negotiated the monarchy’s own tentative steps towards free trade in the 1786 Anglo-French trade agreement, hoped that foreign competition might break open these encrusted structures and promote equality. The physiocrats, the most eminent prerevolutionary French school of thought, emphasised how the monarchy’s system of mercantilist restrictions had worked to the disadvantage of rural production, a sphere that employed the vast majority of the population in the late eighteenth century. Mercantilism had further prioritised the export of French manufactured products instead of helping local farmers. The physiocrats argued that the establishment of secure property rights and a regime of laissez-faire would allow France to concentrate on its natural advantage in the export of grain and wine, sectors that would create true value as opposed to the sterile gains from industry and commerce.8 After the outbreak of the Revolution in 1789, physiocratic reasoning was replaced by Smithian logic, but the link between equality and economic freedom was maintained. Many debates in the National Constituent Assembly stressed that free trade was an essential step towards dismantling the stifling legacies of France’s feudalist past. Only the establishment of a system of natural liberty in place of artificial regulations would increase employment and usher in an era of economic equality that would help to fulfil the Revolution’s tripartite political credo of liberty, equality and fraternity.9 State intervention, however, persisted longer in France than the revolutionaries had hoped for. First, by 1792 many began to recognise that in a country marked by existing wealth inequality (especially in landholdings), free trade alone would not ensure general prosperity if the government did not assume an active regulatory role.10 Most importantly, the outbreak of the

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Revolutionary Wars and the attendant need to organise military supplies, mandated intervention on a much larger scale than anticipated. Within a few years, this led to a revival of tried-and-tested mercantilist regulations, which reached their apogee after the declaration of the Empire by Napoleon Bonaparte in 1804.11 The political economy of Napoleon’s Empire deserves some attention, if only because it illustrates the slow transition from mercantilism to modern economic nationalism during this period. Napoleon himself was an unabashed mercantilist, a position most starkly illustrated in his reasoning behind the Berlin Decree of 1806 that instituted the Continental Blockade on Britain. The blockade was based on Napoleon’s belief that, as a mercantile country, Britain was economically dependent on an export surplus with the European continent. This surplus guaranteed Britain the inflow of bullion it needed to finance the war. With its exports diminished through a blockade, Britain would be forced to sue for peace, regardless of the strength of the Royal Navy on the high seas. Napoleon went so far as to sell French grain to Britain in an effort to turn the balance of trade against it, an act glaringly out of place in modern conceptions of an economic blockade.12 It was also not economic nationalism. Napoleon’s objective was economic warfare, that is the use of trade as a political weapon, rather than the construction of a community of French producers and consumers. Empire-building potentially had the reverse effect, because the absorption of western Europe into the French Empire brought the producers of old France into unwelcome competition with technically advanced producers in the Netherlands and the German states, and to a lesser extent Tuscany and Catalonia. This irony of empire-building was not lost on French producers, many of whom were quick to petition for redress. Other manufacturers, mainly those who could hold their own against continental producers but not against British competition, vocally supported Napoleon’s course because imperial expansion brought access to continental markets while the blockade kept out British imports.13 Yet Napoleonic mercantilism, connected as it was to military aims, could not survive the fall of the Empire and the transition of France to a peace-time economy. After Napoleon’s defeat, French policymakers focused on the domestic market. This was the legacy of Jean-Antoine Chaptal, who had been Napoleon’s Minister of the Interior prior to the declaration of the Empire. Chaptal’s portfolio had included responsibility over economic affairs. Although he was not part of Restoration-era cabinets, his synopsis of economic policy since the Revolution, De l’industrie française (1819) exercised a strong influence on post-Napoleonic policy debates.14 Chaptal, a renowned chemist and entrepreneur, was a child of both the French and Scottish Enlightenments. As the former, he acknowledged the centrality of Rousseau’s ‘public spirit’ founded upon economic equality. As the latter, he accorded a greater role to individual economic freedom than the

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dirigisme of Napoleon or the Ancien Régime would permit.15 Nonetheless he promoted an activist state that would reward those individual actions that were in line with the general interest, because ‘when a government does not accord to those exercising a profession all the attention which they deserve, it stifles in them that sentiment of generosity which could entice them to sacrifice their own interest for the interest of their fatherland; it creates egotism’.16 The government needed to forge close links to promising producers by sharing technologies and providing financial support, including tariff protection. Chaptal’s strategy relied on networks of scientists, manufacturers and financiers who under the aegis of the government would work to diffuse industrial technology and skills across France. This resulting industry would be based on the adoption of modern machinery, allowing France to challenge British industrial dominance.17 Chaptal can be read as an early advocate of industrial policies. In his dynamic vision of machinery as a source of growth and in his vision of an economic community based on national elites there is a certain similarity with Alexander Hamilton. Chaptal’s work did indeed find resonance across the Atlantic, where Mathew Carey made heavy use of them for his own Essays (see Section 2.4).18 The prospects for the realisation of Chaptal’s programme after Napoleon’s fall were auspicious. The Continental Blockade had created industries dependent on a protected market and these industries were quick to lobby the restored Bourbon monarchy for protection.19 Realising the importance of the domestic market, the monarchy increased investments in infrastructure, in particular in the repair of the derelict road and canal system.20 The restored regime, for all its reactionary intent, could not revert back to the old economy of feudal privilege in an age characterised by the persistent threat of uprisings. For conservatives, inequality had thus become a concern.21 Even liberal French economists, who detested the Restoration but wished to preserve property, explored new ways of combining laissez-faire with promoting economic equality. Among these, Charles Ganilh (1758–1836), an early populariser of English classical economists in France, was among the most influential. For Ganilh, an equal distribution of wealth increased consumption, which would increase activity in trade and manufacturing. At the limit, free exchange could end up being self-defeating if it led to a disproportionate concentration of wealth.22 Less influential, but nonetheless useful as an illustration of French thinking during this period is Louis-François de Tollenare (1780–1853), whose Essay on the Barriers to Trade in Europe developed a defence of economic nationalism firmly rooted in French thinking on nationhood.23 De Tollenare defined a nation not in linguistic terms, but as a people consuming the same public goods. The taxes paid by firms and individuals to fund public goods are therefore sacrifices made for the nation as a whole. When facing international competition, however, firms compete on cost of which taxes constitute an

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important part. Trade then leads to a race to the bottom, with firms cutting costs and evading taxes, thus undermining the government’s fiscal base. The provision of public goods declines, undermining the foundation of nationhood itself. A thriving nation, as a community of tax payers, would require protection from foreign competition.24 Such a brand of economic nationalism, however, was not yet dominant in the 1820s, in part because there was fierce intellectual competition. Mercantilists of the old school continued to hark back to Napoleonic or even Colbertian days.25 Many liberals, such as Jean-Baptiste Say (1767–1832), the most influential French economist of the era, continued to associate state intervention with the retardation of the Ancien Régime, especially when it bore the face of the restored Bourbon monarchy. Similarly, satirists like Frédéric Bastiat (1801–50) successfully portrayed calls for protection as symptoms of factionalism and special interest politics, both being anathema to the public spirit.26 Finally, there were the followers of the late apostle of industrialisme, Claude-Henri de Saint-Simon (1760–1825). They offered an alternative ideology of late industrialisation. Saint-Simonians stressed the importance of industry and technology, as well as the role of centralised resource allocation. They believed that this would permit a rational organisation of production and usher in a utopia of material progress. Their vision was dynamic, like that of expansionist nationalists, but the Saint-Simonians envisaged a degree of planning far beyond what most bourgeois nationalists could accept at that time. Furthermore, most Saint-Simonians stressed that the efficient organisation of production would transcend borders, leading to the supersession of nations.27 This was clearly unacceptable to any nationalist. The July Revolution of 1830 changed the conditions under which discourse on political economy could take place in France. It dislodged the reactionary Bourbons and ushered in a liberal constitutional regime under the ‘Citizen King’ Louis-Philippe.28 As the new regime was liberal and bourgeois, it severed the mental association between protection and political reaction that had bolstered the arguments of free traders such as Say and Bastiat. Second, the revolution had once again highlighted the acute threat of social revolt and strengthened the arguments of those seeking to redress its social causes. The aftermath of the revolution precipitated a flood of tracts from economists and industrialists claiming to show that exposure to world markets entailed economic volatility, which had worked to the detriment of social stability. The bête noire in this story was, as usual, Britain. For French patriots, Britain served as the embodiment of a system combining the vices of aristocratic privilege with the horrors of large-scale industrial complexes producing for the export trade. This combination had resulted in squalid pauperism in British cities. By trading with its neighbour across the Channel, French nationalists feared, the country would import not only British goods, but also the poverty of its working class. This argument was quite similar to the one Henry

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Carey would develop two decades later: competition with Britain would lead to firms cutting wages and skimping on workers’ welfare (Section 2.6). In the context of the French focus on economic equality, therefore, the slogan of protection became the defence of ‘National Labour’ (Travail National), and the main society through which economic nationalists spread their ideas adopted the telling name Association pour la Défense du Travail National.29 The arguments surrounding the defence of Travail National were not only successful because they tapped into widespread Anglophobia. They could appeal to progressives on the left advocating worker’s rights as well as to liberals and conservatives who valued social stability. Of the last group, Charles Dupin was the most influential. A politician, former Napoleonic soldier and close follower of Chaptal, he advocated social reforms as a solution to both France’s social ills and its developmental gap with Britain. For Dupin, tariff protection was a ‘vast association of mutual insurance’, providing workers with a safety net that obviated the need for direct social assistance.30 Like Chaptal, his conclusions were driven not so much by theoretical arguments, but by statistical data and casual empiricism. Dupin’s Forces Productives et Commerciales de la France (1827) was in essence a work of economic history, which sought to show empirically that Chaptal’s industrial policy and the protection of the past had caused industrial growth.31 It served as the scholarly underpinnings for Dupin’s ferocious protectionist speeches on the floor of the Chamber of Deputies in the 1830s.32 This historical approach appealed to Friedrich List, who read both Chaptal and Dupin early in his career. He approved of their mode of policy-focused reasoning unencumbered by the ‘abstract’ theorising which he detested in classical political economy. One can therefore find echoes of Chaptal and Dupin’s empiricism in List’s writing on the historical evolution of trade policy.33 The French thinkers had arrived at similar conclusions to List regarding the need for protection, albeit following different modes of reasoning. For List, this supported the general validity of his theories beyond the USA and Germany. Similarly, Chaptal and Dupin’s reputations as policymakers demonstrated the practical applicability of protectionist theory.34 Dupin was one of List’s main points of contact during his stays in Paris in the 1830s, where List was first active as American consul in an unsuccessful attempt to broker a Franco-American trade agreement, and then as a correspondent for the Allgemeine Zeitung, a German newspaper. In the latter capacity, List gained the friendship of Adolphe Thiers (1797–1877), a vocal protectionist who would become premier of France in 1840. List also gained the ear of King Louis-Philippe, and advised him on a system of national credits to stimulate the development of French railroads.35 List, as always attempting to combine academic and practical pursuits, used his time in France not only to lobby the French government to invest in

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railways, but also attempted to leave a mark on local protectionist debates. In 1837, he submitted a hastily composed essay for a writing contest at the prestigious Académie des Sciences Morales et Politiques. The essay, Le Système Naturel d’économie Politique, was geared towards its French audience, and heavily referenced Chaptal and Dupin. The Système Naturel is notable not only because it showed the breadth of List’s international ambition, but also because it expanded in two important respects on the American Outlines.36 The first innovation was List’s attempt to sharpen his notion of economic change by formulating a stage theory of development. Nations, List argued, developed from an initial pastoral stage into one of feudal agriculture.37 Feudalism eventually disappeared as international trade expanded and agriculture commercialised. This ushered in an international division of labour between agricultural and manufacturing nations.38 This specialisation, however, is threatened by international conflicts, which encourage agricultural nations to develop their own manufacturing industry through protection.39 For List, this was a fruitful argument because it suggested that protection was not an aberration, but a natural outcome of the process of development.40 In his second ‘French’ innovation, List attempted to corroborate these theoretical predictions with a detailed discussion of the commercial history of major trading nations, following the historical mode of analysis of Chaptal and Dupin.41 The idea of development through stages and the use of economic history were important elements of List’s magnum opus which he published four years later. This indicates the centrality of List’s French experience. After having penned the Système Naturel, List resolved to ‘recast [the] essay as a book’, predicting that ‘such a book, if well-written and to the point, must win publicity and influence’.42 However, List did not share the French motivation for an economic nationalism founded on ideals of social equality. The social question remained at the margins of List’s work, and if anything, he tended to see high wages as a hindrance to economic growth. He never shared the French appreciation for the precariousness of bourgeois economic progress in the age of revolutions. Whereas French policymakers drew up institutions designed to counter the external competition from Britain because they feared domestic uprisings, List’s protection was motivated by a desire to catch up with Britain. His brand of economic nationalism was driven by external differences in development, paying little attention to the domestic distribution of income.43 On the level of discourse, French protectionists were successful to the extent that, both at home and abroad, protection soon came to be regarded as quintessentially French.44 An observer of the industrial north lamented in 1835 that workers had fallen victim to ‘the blind prejudice of industrial nationalism’.45 For Henry Carey, writing in 1858, France was as synonymous with protection as Britain was with free trade.46 As with many other economic

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nationalisms of the early nineteenth century however, there remained a considerable gap between rhetoric and practice. This concerned both the degree of domestic integration in the French economy, as well its external orientation. Investment in infrastructure, especially railways, remained relatively sluggish compared to British or German pacesetters, despite the focus on domestic markets after Napoleon’s fall. This affected the speed at which economic nation-building could proceed. It may well be that the evocative image of peasants only turning into Frenchmen after the spread of railways at the end of the nineteenth century is inaccurate for France as a whole. Already by the 1820s, workers and businesses in many parts of the country interacted with national policy. Nonetheless, even in Dupin’s time there were many remote rural regions where national consciousness and integrated markets were still a thing of the future.47 Moreover, despite its protectionist reputation, French external tariff rates were consistently lower than those in Britain in the century’s first half (although the heavier reliance on outright import prohibitions in France makes an exact comparison difficult).48 After the establishment of the Second Empire in 1852, France forged ahead in leading the European movement towards free trade with the signature of the Cobden-Chavalier Treaty (1860). This reflected the enduring influence of classical ideas about free trade in France during the period, at least among some elites. At the same time, these attitudes did not strike deep roots and their popularity remained limited to small circles of Imperial notables. It soon came under attack after the Empire’s fall and the establishment of the Third Republic in 1870. The nationalist reaction against free trade was led by the Republic’s first president, Adolphe Thiers, the man who had been among the foremost advocates of protection in the early 1830s and an ally of Dupin and List during that period.49 As in Germany, economic nationalism required a long gestation period before manifesting itself in policy, but it eventually had an impact beyond the writing chambers of List and his peers.

3.3 Money and Language: The Romantic Reaction When List returned to Germany in the 1830s after his stays in the United States and France, he found an intellectual milieu that had developed its own ideas about economic community. These conceptions, often grouped together as ‘economic Romanticism’, are significant for the same reason we should pay heed to contemporary French protectionists.50 German philosophers such as Adam Müller and Johann Gottlieb Fichte, like their French counterparts, were concerned about the effects of globalisation on national unity and patriotic values. Unlike the French school, the Germans resented trade not because it caused inequality, but because they believed it levelled traditional distinctions

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within and between societies. Romanticism became a conservative and sometimes radically reactionary strand of economic nationalism. Romantic thinkers had little interest in growth and promoted a programme of strict isolation to preserve local cultural idiosyncrasies. Despite appearances, however, Romantics were not just traditionalists but also a modern nationalist movement. They promoted economic and cultural integration within the nation, emphasising the mutually reinforcing role of money and language in fostering spiritual unity among Germans. The obsession with unity was a result of the economic fragmentation of the German states. *

Language became the prime marker of national identity in central Europe in a slow process of cultural ‘revival’ that began in the eighteenth century.51 In the states that would later become Germany, the centrality of language arose out of the political fragmentation of the region into a multitude of competing fiefdoms, cities and ecclesiastical polities. Apart from the fleeting and largely nominal authority of the Holy Roman Emperor, the only commonality many inhabitants of these lands shared was the German language. In its supravernacular high form, this language was used and promoted by a small circle of intellectuals. By the end of the eighteenth century, these travelling writers, poets and philosophers had created an intellectual community above the level of the individual German-speaking polities. This cultural unification was in part a deliberate process by these intellectuals who were often of non-noble backgrounds and could hold little political power in the aristocratic states.52 Johann Gottfried Herder (1744–1803) stands out as exercising a commanding influence on the later Romantic movement. Herder became disenchanted with the universalism of French Enlightenment thinking, which he felt reflected the urban bias of its mostly Parisian practitioners.53 This led him to search for the local, original and authentic element in civilisation. This he found in the customs and traditions of the Volk, the common people. For Herder, language was the most important repository and expression of these folk traditions. Only if Germans spoke German, instead of Latin or French, could they access the true font of their intellectual energies. True Kultur was specific, in tune with the conditions of its local environment, and not as a whole transferable across nations. Herder stressed the inherent value of distinct civilisations, but did not assign civilisations a hierarchical order.54 Herder’s nationalism was cultural, not political or economic.55 His elevation of Kultur did not encompass claims to national statehood or economic unity. Instead, he emphasised the importance of good governance as the prime criterion for economic administration, which could be carried out by the individual German principalities.56 At the close of the eighteenth century, the focus on good governance (gute Polizei) was the main distinguishing feature of German thinking on statecraft

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and economic administration.57 Thinkers of this ‘cameralistic school’ operated on the premise that the absolutist prince had to ensure the happiness of his subjects in order to make the state powerful. Such happiness rested on social harmony as much as on material wealth, and required the constant regulation of political, social and economic life by the prince. Cameralism shared with western European mercantilism a preoccupation with bullion flows, but it was not so directly concerned with the manipulation of long-distance trade.58 With the exception of the Hanse towns in the north, the trade passing through most German principalities was of moderate proportions. Some states, most notably Prussia, encouraged the set-up of domestic manufactures by granting monopolies and encouraging high-skilled immigration. Yet commercialisation was often hindered by the power of guilds in the towns and the prevalence of serfdom in the countryside. Markets were further constrained by the innumerable customs barriers between and even within states. Until 1818, even Prussia maintained customs barriers between its individual provinces.59 Further transaction costs were created by the fact that most German states operated their own coinage of varying and fluctuating metallic content.60 As it had done in pre-revolutionary France, suffocating economic regulation led to calls for liberal political reform and provided fertile ground for Smithian economic thinking. By the turn of the century, many former cameralistic regulators had become convinced of the capacity of commercial society for self-regulation.61 This was echoed by reformist members of the Prussian bureaucracy. Consequently, Prussia’s drive to tear down its internal customs barriers owed a lot to Smithian ideas regarding the salutary effects of free trade and the division of labour, rather than to any budding economic nationalism. The sudden and almost complete acceptance of economic liberalism in the German states after 1800, later derogatorily dubbed Smithianismus, overwhelmed many contemporaries. In Prussia, guilds were liberalised in 1811 and first efforts to end serfdom were introduced in 1810. For many reforms, Adam Smith was of course not the only inspiration. Even more important was the example of revolutionary France, where similar reforms had been carried out that provided a blueprint to German policymakers.62 Such sudden and sweeping reforms did not go uncontested. Reformers faced opposition from the nobility, who feared that serf liberation would undercut their economic position. Artisans feared that abolishing guilds would unleash competition and mechanisation. Some existing manufacturers worried about the effects of British imports if trade barriers were removed. So far, these were just interest groups.63 What gave the Romantic reaction to these changes a decidedly nationalist quality was the feeling that these reforms were carried out under unwanted French pressure. Parts of the Rhineland had seen the implementation of modern civil law under French military occupation. The most radical of Prussian reforms, the Stein-Hardenberg Acts, were an explicit modernising reaction to the crushing Prussian defeat by Napoleon at Jena and

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Auerstedt in 1806. As the ensuing wars against the French Empire became a war of national liberation mobilising large parts of the population, German nationalism was quickly radicalised.64 While many German intellectuals fought the French, but continued to welcome reforms, Romantics additionally rejected the ideas they associated with the foreign enemy. The French Revolution itself, argued Romantic writers, such as the poet Novalis (1772–1801), was a miscarriage of Enlightenment ideals such as rationalism, individualism, constitutionalism and universalism. These ideals had uprooted traditional German society centred around guilds and princely authority. The radical social engineering of the French Revolution, especially the Jacobin Terror, further strengthened their summary rejection of these ideals.65 In place of rationalism, Romantics emphasised the importance of feeling and intuition in experiencing the world. While many Romantics recognised individual agency and liberty to some extent, they preferred to think of individuals as embedded in social collectives.66 Such collectives, they felt, were organic entities endowed with their own individuality. Because these collectives were the outcome of a long process of organic growth, they could not be changed by top-down legal reform or designed constitutions in the French model.67 Instead of universal truths and laws, Romantics drew on Herder to emphasise the value of local and historical context. Like Herder, they interpreted language as a prime marker of identity. This opposition to universalism and deference to collective identities made the Romantics ready converts to the nationalist cause, while their opposition to reform gave their nationalism a decidedly conservative flavour.68 Their concept of the nation as an organic being, moreover, made them receptive to measures protecting the integrity of this organism from disruptive outside influence.69 These principles find their apogee in the work of Adam Müller, who would become the most influential Romantic economist. Like many Romantics, Müller was sceptical of the ability of states to impose top-down regulatory and tariff barriers on an organically grown social order. The collapse of the Prussian state in the face of the French onslaught had strengthened Müller’s distrust in the capacity of absolutist states. At the same time, Müller saw global free trade as a disruption of traditional economic institutions and harshly criticised the supposedly shallow rationalism, egotism and universalism of Adam Smith. Much of Müller’s criticism betrayed a rather shallow reading of the classics, because Smith had spent much of Book III in the Wealth of Nations arguing for an evolutionary and comparative view of the institutions shaping economic life. Yet that was beside the point. For Müller and his compatriots, Smith had come to signify the anonymous flattening forces of British-led globalisation.70 So how was one to protect the nation against this advancing globalisation if the traditional tools of trade policy were ineffective? Müller’s key argument was that identity, especially a strong national identity, would provide the best

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defence: ‘if you do not liberate [a people’s] hearts, you cannot liberate their industry’.71 If Germans were to return to their own national roots and learn to appreciate the bounties and produce of their own lands, they would no longer have need for pernicious imports. Then ‘the sheer desire for foreign products is as absurd as an oak tree asking “Why am I not a palm tree?”’72 Not only would national sentiment reduce imports, but Müller also believed that a strong sense of national identity would attach itself to a country’s exported goods, convincing foreign buyers of their inherent superiority.73 In Müller’s thinking, national identity is therefore a compromise (or more precisely, mediation) between the polar opposites of absolutist regulation and free trade. This compromise would obviate both opposites. In the same way, Müller’s ideal state unifies a system of dualistic concepts: male and female, agriculture and industry, trade and academia.74 Each duality is represented, and ultimately dissolved, inside one of the basic building blocks of the state. Male and female find their unity inside the family, different professions function inside the guilds, the nobility, clergy and burghers are ordered in their respective estates. The state, however, is not fragmented into these individual building blocks, but forms a totality of human experience, where differences find a synthesis in one organic whole.75 As with an organism, individual parts have no meaning when detached from the whole, and therefore cannot exist outside of the state.76 Clearly, Müller’s vision of the state goes beyond a sentimental invocation of the medieval past (to which Romantics are sometimes reduced). His vision is an almost totalitarian utopia that foreshadows important elements of twentiethcentury corporatism.77 In the interwar period, Müller’s ideas would experience a decisive renaissance at the hands of Othmar Spann (1878–1950), who would fashion them into an intellectual foundation for collectivist nationalism (Section 5.3).78 The radicalism of Müller’s organicism is also apparent in the virulence with which he and many of his fellow Romantics argued for the expulsion of Jews from the state. In arguing that Jews were fundamentally unable to assimilate into German society due to supposed inalterable cultural and economic differences, many Romantics went beyond ‘traditional’ religiously motivated antisemitism. Instead, they contributed to modern forms of economic antisemitism. Müller’s antisemitism was driven by the connection he drew between money and notions of national vitality. Alleged Jewish control over finance, a familiar antisemitic trope, could then be depicted as sapping a nation’s economic and spiritual vigour.79 Müller’s monetary thinking was based on another duality: that of physical capital and creative capital (Ideenkapital).80 The first was the capital of Adam Smith: land, factories, goods. This idea found its material expression in an object: money. The ‘lively’ circulation of money was synonymous with the circulation of goods. Money not only represented the physical economy, it constituted it. A nation’s currency for Müller therefore has an almost

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metaphysical significance: by connecting its members through exchange, it forges them into a monetary community and affirms their spiritual union. By using money or credit, both sides of an exchange affirm their faith in the community.81 Just as physical capital gains spiritual meaning through money, creative capital finds material manifestation through language. This is the nation’s stock of experience and ideas, and the articulation of language by the community of its users circulates and regenerates these ideas. These ideas have economic use as an economic input (what a modern economist would call human capital). As a manifestation of creative capital, language becomes itself an object of economic significance; it becomes a Sprachmünze, which can be loosely translated as ‘linguistic currency’.82 As long as currency and language exist, Müller believed, the nation is alive. By safeguarding and strengthening these two, the government builds strong nations that are able to resist external influence. New states, Müller points out, invest not only in finance ministries, but also in education ministries. He interpreted the taxes paid by citizens to defray these expenses not as sacrifices for a public good, as the French protectionists did, but as interest payments on the nation’s creative capital. All users of coin and words share in the accumulation of this capital.83 Interestingly, Müller saw currency and language not only as necessary, but also as sufficient conditions for national survival. He hence advocated only linguistic and monetary, rather than political, unification of the German states.84 Müller’s nationalism was tempered by one more duality: above the nation stood God. In the communion of Christendom, differences between nations would be mediated, just as estates would complement each other within each nation.85 As such, Müller did attempt to reconcile nationalism with a broader conception of humanity, although he limited this conception to Christendom only (hence another wellspring for his antisemitism). The belief that differences of interest within and between nations would simply dissolve in a synthesis, of course, was difficult to establish with reference to reason alone. In the end, Müller could only close his system through an act of faith, and as such he was truly the product of Romantic thinking. There is a fuzzy border between a system of dualism and one of contradictions, and Müller often did little to avoid the latter.86 The radical nature of romantic thinking, as well as its focus on money, finds an even clearer expression in the work of the philosopher Johann Gottlieb Fichte. More so than Müller’s work, Fichte’s contribution to economics, The Closed Commercial State (1800) was an attempt to speak to a broader set of issues confronting European societies at the turn of the century. Fichte addressed two debates riveting intellectual circles at the time.87 The first debate revolved around Rousseau’s argument that republicanism required a measure of economic equality. This was an ideal that many believed to be threatened by globalisation and industrialisation (Section 3.2). The fact that Fichte was

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motivated by Rousseau’s focus on inequality, like the French protectionists, explains the parallels in their thought.88 The second problem Fichte addressed was that of war and peace. This was based on his reading of Immanuel Kant’s argument that peace would arise through republicanism in the latter’s influential Perpetual Peace (1795). Building on Kant’s concept of ‘unsocial sociability’, Fichte argued that human beings were fundamentally motivated to trade in order to satisfy material desires (sociability).89 However, trade also leads to unsociable conflict, because countries vied with each other for control over trade. For Fichte, the history of trade over the prior centuries was the history of war. Buyers and sellers, acting on opposing interests, were locked in Hobbesian anarchy, an ‘unceasing war of all against all’.90 Mercantilist states had tried to aid their merchants through military means, leading to incessant battles on sea and land. In an effort to protect their trade balance and their bullion stocks, states had also been forced to impose import barriers. Yet these barriers were ineffective, as they led to retaliation by other states. In the end, the heavy tax burdens demanded by militarised states had impoverished nations and led to oppressive political structures.91 Like Müller, Fichte stressed that eighteenthcentury mercantilism and absolutism were part of the problem, not the solution.92 Fichte’s solution was more radical: ‘What is demanded is the complete elimination of all direct commerce between any citizen and any foreigner.’93 If trade between states were eliminated, the cause of intra- and interstate conflict would be eradicated. Internal peace would be achieved in part because autarky would limit foreign economic shocks, such as those causing the outflow of bullion.94 External peace would be achieved by avoiding traderelated conflict, which would also reduce domestic tax burdens. Fichte’s autarky was a bold attempt to solve two problems at once. Fichte outlined three important conditions for the state to be successfully closed. First, the state must attain its ‘natural boundaries’. It was crucial for a state to contain several complementary economic regions, as that would heighten its ability to produce a large variety of domestic goods. A state in its natural boundaries would also lack an incentive to expand further, decreasing the risk of warfare.95 Fichte was vague about how exactly these boundaries would be determined. He occasionally suggested that states would ‘dimly feel’ their true extent.96 As with Müller, it was in attempting to reconcile possibly conflicting aims of different states on the world stage that Fichte was most ardently utopian. The second preparation for autarky, also in true romantic tradition, was monetary reform. Fichte knew that international transactions required ‘world currency’, that is gold and silver. The key to autarky was therefore the introduction of a national currency of no inherent value. This currency would derive its value only from decree by the national government, thus making it of

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no use to foreigners. Citizens would exchange global for national currency at government exchange offices, and therefore be deprived of the key means of carrying out international transactions.97 Third, Fichte’s system presupposed complete governmental control over labour markets, migration, prices, currency and foreign trade. Coupled with his egalitarian motivation, these features have led some scholars to interpret the Closed Commercial State as a forerunner of state socialism, rather than economic nationalism.98 It is true that the Closed Commercial State does not presuppose existing bonds of nationhood, other than maybe those relying on a diffuse sense of natural geography. Instead, and more ingeniously, Fichte saw the closure of the commercial state as the precondition for the creation of nationhood.99 In a striking passage at the end of his work, he writes: It is clear that in a nation that has been closed off in this way, with its members living only among themselves and as little as possible with strangers, obtaining their particular way of life, institutions, and morals from these measures and faithfully loving their fatherland and everything patriotic, there will soon arise a high degree of national honor and a sharply determined national character. It will become another, entirely new nation. The introduction of national currency is its true creation.100

In other words, nations can be created ex nihilo with a currency as the constituent element of nationhood. Fichte then proceeds to extol the virtues of the ‘solid national culture’ thus growing out of the use of national currency, replacing the current rootless global ‘multifaceted culture’ based on gold. Only from the diversity of national cultures grown in monetary isolation could a true ‘omnifaceted, purely human civilization’ eventually emerge.101 Fichte’s full relevance for nationalism, however, can only be grasped by understanding the Closed Commercial State in conjunction with his Addresses to the German Nation (1808). It is the latter for which he is generally better known in the English-speaking world. The Addresses, composed as a call to action after the Prussian defeat at Jena and Auerstedt, have secured their place as prime documents of an aggressive and exclusionary German nationalism. In it Fichte did away with the equality between nations which Romantics had maintained since Herder. Instead, he expounded Germans as the Urvolk, the original and pure people, whose unique language and culture predicated them to save humanity from universalist French tyranny.102 The fact that the author of the Closed Commercial State would later emerge as the prime apostle of German linguistic nationalism may have done much to conflate the two, despite the emphasis on constructed nations and universal values in the former.103 Nonetheless, the Addresses in many ways continue where Fichte had left off in his earlier work. The concept of natural boundaries is reinterpreted: instead of geography, boundaries are now determined by language.104

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The Addresses continue to depict world trade as a source of exploitation and misery, and extol the virtue of isolation.105 As before, autarky is understood to be morally superior, as it furthers national cultural growth, but also avoids exploiting other peoples. Trade, Fichte explains, is responsible for the twin evils of slavery and colonialism.106 Fichte therefore did not abandon efforts to stress the supposed benefits of the German nationalist mission for humanity at large.107 The necessity to square this circle between national egotism and larger moral principles was to be one of the main bequests of the Romantic movement to List (Section 3.5). The other Romantic bequest to nationalist thinking was the vision of the national state as an organic unit, endowed with its own will and purpose that could override those of individuals.108 This complemented the legalinstitutional conception of national personhood List had imported from the American Daniel Raymond. List did not fully espouse organicist theories himself, as shown in the next Section, but he did adopt the Romantic fascination with language and culture. Any Romantic influence on List was not due to personal interaction. Fichte died before List had become politically active, while List and Müller met only briefly, in 1820, when both petitioned an assembly of German ministers in Vienna regarding trade policy. Their proposals diverged substantially, reflecting tensions between isolationist and expansionist aims. Müller’s petition wanted to restore a native economy of self-sufficient crafts and agriculture under the auspices of German principalities, while List stressed the need for industry and the creation of national markets. List would in the 1840s angrily deny the charge that he had taken inspiration from Müller, referring to him as a ‘nothing but a spirited and learned obscurantist’.109 Nonetheless, Romantic conceptions of nationhood had become general currency within German academia by the late 1810s, when List taught at the University of Tübingen.110 The Romantics carried weight because they were activists as well as philosophers. Many served in official capacities as diplomats and senior civil servants. Müller saw philosophy as a tool to solve practical political problems and his work was addressed to officials and statesmen.111 Fichte expressly set out to influence public debates from an early point in his career, with both the Closed Commercial State and the Addresses being written as proposals for reform.112 What remained of those efforts was a particular German ideology of collectivist nationalism, intimately related to visions of self-sufficiency.

3.4 List’s Unified Theory of Growth The National System of Political Economy as written by Friedrich List in 1841 is without doubt the most influential work in the economic nationalist tradition. We will be able to trace its impact in many locations, including Argentina, Japan, India, Ireland, Russia and Turkey in the coming chapters. The

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significance of the National System is in part due to the style of the work itself. List was a politically astute writer, who provided politicians with easily digestible recommendations on the use of infrastructure, credit and tariff policy. These tools served a clearly identified motive: nurturing the industrial base required for economic and military parity with the advanced nations (that is, Britain). List argued that this aim justified a government overriding individual interests, for example by instituting protectionist tariffs that could inflict shortterm costs on consumers or farmers but would spur long-term development. At the same time, List cautioned against excessive protectionism, fearing that isolation from the world economy could choke off growth.113 While List’s expansionist ideas would carry much weight in subsequent decades, we should be careful not to ascribe too much novelty to the National System. It’s mode of historical reasoning was adopted from the French protectionists, the focus on catch-up was Hamiltonian, while the concept of nationhood was due to Daniel Raymond. Finally, List’s references to culture and language reflect Romantic influences. List did not create economic nationalism, nor represent its only version. He crafted a synthesis out of themes that had been fundamental building blocks of nationalist thought for many decades.114 *

During much of the 1830s, Friedrich List lived an itinerant lifestyle, moving back and forth between France and Germany, discharging his duties as American Consul in Leipzig while also lobbying on matters of commercial policy in Paris. At the same time, he worked as a journalist, economic commentator and activist for the cause of German unification. For List, economic unification was not only a nationalist ideal, but it also made solid business sense. He had gained experience with planning and costing business ventures in the USA and used this expertise to help construct one of Germany’s first railway lines, opened between Leipzig and Dresden in 1839.115 It is against this biographical backdrop that List wrote his National System. It is also against this backdrop that the work should be read: not as the profound and somewhat detached musings of an academic economist, but as the reflections of an activist intimately connected to the economic changes of his time. The year 1834 saw the foundation of the Zollverein, the Prussian-led customs union that would eventually tie most German states, bar Austria and the Hanseatic cities, into one common market. Governments in Belgium, France and across the Germans states started to express interest in the construction of railway lines, many of which were eventually built under state auspices. American tariff policy became the subject of ever more heated debate in the USA with the

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Nullification Crisis of 1832–33. List did not merely observe these changes, he wanted to shape them. The National System was his key instrument in these efforts, a work of political advocacy addressed to those operating the levers of power in continental Europe and the United States. While Müller and Fichte had written their works with statesmen among the intended audience, List’s work was almost solely directed towards this purpose.116 List’s approach to academic writing as political advocacy is best exemplified in the rhetoric, structure and discursive method of his National System. The work is prefaced with a brief introduction that provides an easily readable synopsis of the remainder of the work. This executive summary offers a list of policy recommendations for the statesman. This includes safeguarding political independence and establishing a manufacturing industry, goals that List presents as mutually reinforcing. Industrialisation is to be assisted by moderate import duties on industrial products.117 From the very start, List presents his recommendations as calls to action – in the face of Britain’s growing superiority, no statesman can afford to delay essential reforms: ‘The more rapidly is the distance between stationary nations and those which are progressive increased, . . . the greater is the peril of remaining behind.’118 The consequences of disregarding his advice, List warns, are dire because ‘nations have even lost their independence, and their political existence, because their commercial policy had not aided the development and consolidation of their nationality’.119 List is at pains to stress that, while theoretically sound, his recommendations do not originate in abstract speculation, but are based on common sense. Throughout the work, he extols the virtues of the ‘practical men’ (they are always men according to List) at the helm of the state, seasoned through experience and observation.120 His conclusions are didactically illustrated with examples drawn from actual commercial policy. It is from this focus on practical policy that two distinguishing features of the National System emerge: its reliance on historical evidence and its ferocious criticism of Adam Smith. List devoted Book I of the National System to economic history. Arranged by country-specific sections, this volume traces the commercial history of a select number of European nations and the USA from late antiquity to List’s time. The purpose of this section is to illustrate how history offers a reservoir of experience from which contemporary statesmen can learn. This is why List continually interrupts his historical narrative to point towards the conclusions he draws from the past. Principally, List surmises, history teaches that the freedom and unity of a nation are of supreme importance for its economic wellbeing. For example, the rise of the Italian city states showed ‘that liberty and industry are inseparable companions’, while their eventual demise in the modern era demonstrated the economic costs of political fragmentation.121 Moreover, List uses his historical case studies to stress the centrality of

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government intervention: Medieval England was merely a supplier of raw materials to Flanders and the German cities of the Hanse, before Edward III wisely promoted the domestic textile industry. This was the founding act of British commercial dominance.122 List thus presents the far-sighted policymaker as the ultimate agent of economic change. The notion that political will can shape economic structures has since become commonplace among nationalist thinkers and accounts for their fixation on policy. History not only served to illustrate List’s policy recommendations, it also provided the methodological backdrop of the National System. Economic theory had to take the historical and local context of each nation into account before formulating policy. ‘Political economy, in matters of international commerce, must draw lessons from experience’, List stated, adding that ‘the measures it advises must be appropriate to the wants of our times, to the special condition of each people’.123 Different policies were advisable depending on a country’s stage of development, an idea that built on the stage theory List had developed in France (Section 3.2).124 This once again placed national policymakers, who were best placed to judge the local context, at the centre of economic decision-making. The second outcome of List’s focus on practicality was his rejection of Adam Smith and the classical school of political economy. This rejection had two facets. For one, List chastised Smith’s theories for being abstract speculations of little use to practical men of policy. Because Smith and his followers did not take local context into account, their prescriptions could not be sensibly applied.125 More aggressively, List presented the ideas of classical economists as the ‘Trojan Horses’ of British global commercial domination which would tear down the tariff walls of their competitors.126 ‘This explains the favor with which the most enlightened economists in England regard free trade’, List explains, ‘and the reluctance of the wise and prudent of other countries to adopt this principle in the actual state of the world’.127 Like many nationalists, List was convinced that British economists reflected British interests. Not all of List’s attacks on Smith, however, are to be taken literally. Many were rhetorical devices designed to discredit competing ideas, rather than serious contributions to academic debate. Smith was more historically minded than List made him out to be; he had also acknowledged the necessity of military defence.128 List’s criticism could more appropriately have been levied against contemporary Ricardian economists, whose thinking was more abstract than Smith’s had been. It is possible that List was influenced by the misleading interpretations of Smith prevalent in German academia at the start of the nineteenth century, which in turn built on an abridged version of the Wealth of Nations written by the German historian Georg Sartorius in 1796.129 However, List’s abuse of Smith cannot be attributed solely to textual misunderstanding, because the extent of List’s misreading of Smith had little basis in Sartorius’ text.130 Furthermore, if List did not see the need to go

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beyond second-hand accounts of Smith more than three decades after they had been written, one may suspect that the content of the original mattered little to him. What mattered was the polemical impact of the critique. Smith was still the best-known economist of List’s time and as a British thinker he presented the perfect straw man for an argument levelled against British pre-eminence.131 Despite the heated rhetoric and salesmanship of the National System’s first chapters, List did eventually lay out a theoretical argument in Book II. This theory built to a significant degree on his work in the American Outlines. It allowed List to progress beyond the simple advocacy and turgid repetition that mark the work of other contemporary economic nationalists such as Mathew Carey. That is not to say that List’s theory is distinguished by its intellectual sophistication. The theory derives its power from its intimate connection to List’s empirical observations. Coupled with List’s talent for intellectual marketing and his political connections, this made for a potent brew.132 List’s starting assumption is that private actions do not always engender public benefit. List gives several examples of such instances. Individuals may not factor in the effect of their actions on future generations; avaricious providers of shipping services may gamble with the lives of their passengers; private trading with the enemy is hurtful in times of war.133 Most importantly, if property is insecure and war and oppression threaten a country’s inhabitants, ‘individuals would be in vain laborious, economical, ingenious, enterprising, intelligent’.134 List’s second core assumption provides a way out of this problem: Individual actions are conditioned by ‘institutions and laws, social, political, and civil’.135 Given that the institutional and legal framework is malleable, it follows that shrewd policymaking can channel individual actions, motivated though they are by self-interest, into a potential benefit for the community. From this difference between ‘private’ and ‘national’ economy, List derives the responsibility of the policy maker to shape institutions. Nonetheless, List was not an advocate of state-ownership of production, or of a command economy in the style of Fichte. Rather, he envisaged the government as an enabler of markets to work in the national interest: ‘Government does not by this policy restrain private industry; it opens, on the contrary, a new and wider field of activity to personal and natural power as well as the capital of a country.’136 In his motivation to ensure military security and in his vision of markets working for the nation, List had absorbed Hamilton’s influences. List’s definition of the nation as being synonymous with the ‘institutions and laws’ that channel individual actions, on the other hand, reflects Raymond’s thinking. Yet List goes beyond Raymond’s American conception of a nation as a legal institution. He additionally emphasises the importance of culture by asserting that ‘between the individual and the whole human race there is the nation with its special language and literature, with its own origin and

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history’.137 Like formal laws, these cultural institutions shape economic behaviour for better or worse. It is through the nation that an individual acquires ‘intellectual culture, productive power, security, and well-being’.138 It is here that List comes closest to the organicist ideas of Müller and Fichte, according to which individuals were inseparable from the ‘creative capital’ of the nation. However close List may have come to organicist notions of the nation, he never quite crossed that line.139 It is true that he permits the nation to override individual liberties, but most examples he provides of such instances, such as the ones given above, are quite compatible with nudging short-sighted individuals into the direction of general welfare. For example, List stressed that long-term saving and investment involved a trade-off between the welfare of current and future generations that individuals could not make.140 Similarly, individuals needed to be coerced to pay taxes for their joint security, without which no production could take place.141 It is also important to stress that the Listian concept of the nation, although it encompassed language and culture, was never solely based on such characteristics. Being familiar with American ideals of nationhood, he also did not view language as a criterion for exclusion. Rather, List saw language and culture as being among a number of attributes that ‘normal nations’ could be expected to have, the most important of which was, however, the ability to independently enact laws regulating communal life.142 Nations were primarily communities living under the same law, not the same tongue, as Müller or Fichte would have it. And although List emphasised the cultural contingency of institutions, he also does not treat differences in language and culture as insurmountable barriers to communication. Because he was mainly interested in economic growth, he resented ethnic isolation as unproductive. He approved of the immigration of Iberian Jews to Britain and of French Huguenots to Prussia on account of their ‘productive powers’.143 He expressly advocated racial intermarriage on account that it would ensure ‘power of mind and character, in vigor of constitution and bodily beauty’.144 He also dismissed theories that British dominance was due to Germanic racial or cultural superiority, noting that before the decision of Edward III to protect domestic manufactures, the nation was poor despite its native culture.145 In fact, cultural and ethnic determinism would have run against List’s premise that it was prescient policy intervention that encouraged industry. Reversely, List believed that culture was a result of economic development.146 List thus provided policymakers with a vision of, and a responsibility for, economic development. The notion of development as an unlimited and dynamic process of economic improvement was perhaps List’s greatest contribution to economic thought.147 His contribution becomes most salient when List pitted his concept of growth against that of the classical economists.148 At the core of List’s concept of development was the notion of ‘productive powers’, which he held to be the true measure of economic value. The

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economic value of a good was not its exchange value at any given moment, as the classical economists had proposed. Value lay in the power to produce output in the future.149 Education was of little market value according to the classics, while for List, education was valuable as it increased the capacity of future generations to produce output.150 Of course, Adam Smith had also written on the accumulation of ‘stock’, or capital, but he had mainly focused on material (physical) capital. By following this misguided ‘dead materialism’, List charged, Smith had ignored the most important cause of growth: mental capital.151 List’s concept of mental capital was much broader than modern notions of human capital. While the two concepts are roughly equal on an individual level (education, skill), List held that mental capital also existed at a national level. A nation’s mental power included culture, arts, sciences and legal institutions, all crucial productive powers that determined a nation’s capacity to accumulate wealth.152 And while material power was internationally transferable, mental power was specific to each nation.153 Here we see the building blocks for the generally positive attitude of expansionist nationalists towards the indigenisation of science and technology (Section 8.4). Building on this notion of productive powers, List moves on to his key concern: the importance of manufacturing for the national economy. Like Hamilton and Tench Coxe, List praises manufacturing for its ability to augment the productivity of labour through the use of machinery, thus increasing productive capacity.154 Beyond this rather mechanical relationship, List attached many other benefits to manufacturing. The availability of manufactured goods would spur citizens to labour more industriously. Crucially, the employment of machinery and technology demanded an exertion of intelligence and fostered scientific advances. List was dismissive of the potential for intellectual growth in agriculture, branding farmers as ‘stupid’.155 Only manufacturing could encourage further growth of a nation’s mental capital.156 He thus inverted the political ideal of the patriotic farmer held so dear by Rousseau, Jefferson and the German Romantics. Patriotism and cultural accomplishment could only be found in industry, not in agriculture.157 Manufacturing was also susceptible to a finer division of labour, with different branches of industry increasing the demand for each other’s products.158 Finally, ‘art and mechanics’ were an important input into military might.159 Classical theory, List contended once more, did not consider the value of future production, and therefore ignored the output a nation would forego if it remained agricultural. Agriculture would stunt the nation’s cultural development and material well-being, eventually leading it into subservience to expanding industrial nations.160 Writing fifty years after Hamilton, List was truly the economist for the rapidly advancing industrial age. How could policymakers encourage industry? On a basic level, this rested on guaranteeing citizen’s safety through maintaining the rule of law and

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protecting national security. It also involved liberating the powers of production from feudal or mercantilist restrictions. Like French economic nationalism, this facet of List’s programme was quite compatible with economic liberalism.161 Two further elements were more novel, although they too built on antecedents. First, List advocated the use of public credit to fund the construction of an industrial base. This derived from his argument that the time horizon under which individuals operated was too short for them to commit the funds needed for the long-term buildup of industry.162 Second, List argued for the creation of unified national markets through regulatory homogenisation, the eradication of trade barriers and investment in infrastructure.163 These proposals built on his treatment of the classical division of labour. List agreed with Smith that specialisation in production created wealth. However, fine-grained specialisation also raised the necessity of coordination between many different producers. The ability to coordinate was the association of productive forces. List proposed that this association depended upon individual producers having recourse to a common legal framework, to rapid means of transport, as well as to secure shipments. All these factors mandated the primacy of a unified domestic market over external markets, as international transactions was prone to legal uncertainty, high transport costs and military disruption.164 The division of labour, in other words, was bounded by the extent of the nation.165 What is striking, however, is how comparatively little space List devoted to a detailed analysis of education, credit or infrastructure policy in the National System. Affirmations of these industrial policies are scattered throughout the work, but there is nothing of the in-depth treatment he reserved for trade policy.166 This stands in contrast to the enthusiasm with which he lobbied for industrial policies in practice. His advocacy of public credit in France had been untiring. His promotion of the German railways, that perfect instrument of economic growth, national unification and military power, was decisive.167 His public engagement for German unification and a Zollverein dated back to 1820, when he had loudly protested that internal customs duties were ‘directly endangering the Union, by sowing dissent among the German tribes, by killing the exalted idea of a united German fatherland’.168 Yet in the National System, most of List’s discussion of policy was focused on external trade. As with most other proposals, List’s connection between trade and industrialisation was derived from his theory of productive powers. A country such as Portugal, exporting agricultural goods to England and importing manufactured products in return, was exchanging goods of equal (current) value, as the classical economists had maintained. However, this specialisation did not allow Portugal to maximise its productive potential, especially its mental capital and was therefore an inherently unequal exchange.169 This international inequality warranted a temporary tariff. By

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raising the price of their output, the tariff would allow domestic producers to recuperate the necessary outlays into fixtures and equipment.170 However, List was careful not to overstate the case for protection. His primary objective was growth and he recognised that excessive protection could ruin economic expansion. He emphasised that tariffs should only be pursued if the domestic market was sufficiently large, so that domestic manufacturers would not enjoy a monopoly position.171 Moreover, List scolded the mercantilists for imposing prohibitive trade barriers on raw materials and agricultural products, which would inhibit industrialisation.172 Finally, List utilised his historical interpretation of development to argue that protection was only justified if the appropriate stage of development had been reached. If markets were not developed and a nation’s mental powers had not matured sufficiently, industry would not take root even if it were protected.173 List’s relatively narrow focus on commercial policy is nonetheless surprising if his aim was to pursue a broader agenda for kick-starting industrialisation. A prima facie reason for his choice may have been the centrality of the tariff rate to policymakers in the mid-nineteenth century. It was simply the most important single tool governments had at their disposal (comparable to the role of interest rates in modern macroeconomic governance). Moreover, ‘good’ tariff policy required a careful adjustment of rates, with the protective, redistributive and revenue aspects of tariffs all needing to be balanced against each other.174 The controversy attached to tariff changes, familiar to List from his experiences in the United States, France and the Zollverein, was an indication of their political potency.175 List therefore focused on trade, stating that less controversial industrial policies ‘universally acknowledged to be efficient and practicable’ could safely work in the background.176 A more fundamental reason for List’s obsession with tariffs was his desire to show that they were not a selfish policy leading to international strife, but that they were compatible with the universal progress of humanity. Free trade, he stated, was the ultimate aim. Unfortunately, such a ‘cosmopolitan’ world was impossible as long as nations were at different stages of development, as trade between such nations was likely to be exploitative.177 Moreover, Britain, the current industrial power, worked aggressively to open foreign markets through one-sided trade treaties that cemented the unequal status quo.178 Like Fichte, but decidedly less radical, List thus derived a justification for national protection by invoking the anarchical state of international relations. In the absence of a ‘universal association’ of nations setting trade rules, the only recourse nations had as ‘guarantees of their existence and prosperity’ was to respond with tariffs.179 Once industry had grown to maturity, tariffs could safely be removed and global free trade would be economically sensible and morally justified.180 Rulers could thus erect tariff barriers safe in the knowledge that they were acting not only in the national interest, but in the service of humanity. List

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offered his disciples a utopian vision of development, an ‘indefinite increase’, that stood in stark contrast to the static picture painted by classical economists.181 In providing rulers with this vision, he did not presume to prescribe who those rulers should be, nor did he attempt to restrain their powers beyond diffuse allusions to ‘liberty’.182 All that mattered was winning the industrial race. ‘The start which England has taken in manufactures, shipping, and commerce, should not deter any of the nations prepared for manufacturing industry . . . from entering the list of nations holding the sceptre of industry’, List promised.183 The challenge was set, and the road to expansion clearly laid out.

3.5 Nations and Empires The ideology of Friedrich List was not only expansionist in the sense that it looked to increase production, but also because it potentially opened the door to territorial enlargement. Both facets are intimately related through the Nationalist Dilemma. List recognised that economic expansion required resources and markets, which were harder to get if a nation was isolated by protectionist barriers. At the same time, List was convinced that some degree of isolation was required to safeguard domestic industries. As a way out of this dilemma, List proposed that small countries should unite in economic unions large enough to effectively sustain growth under protection. List argued that membership in such unions would be voluntary, because it was in the best interest of smaller countries to join forces. Indeed, economic nationalists have often pursued voluntary regional integration agreements on such a basis, most concertedly in postwar Latin America (Section 6.2), Africa (Section 6.4) and Europe (Section 8.3). Nonetheless, similar arguments could be used to justify imperial expansion. List himself saw colonial empires as a normal consequence of competition for resources. This created another tension in List’s system. How would the territorial expansion of imperial states be reconciled with the demand for economic autonomy from smaller nations?184 Two brief examples, drawing on Hungary and Poland, illustrate the tensions between local nationalisms and imperial states. They also show how the continued vivacity of liberal ideas in the mid-nineteenth century still stymied the reach of Listian nationalism. *

List prefaced his National System with the French motto Et la patrie et l’humanité, signifying his ambition to speak not for any particular nation, but for mankind as a whole. He stressed that his system would liberate nations from the shackles of an unequal world economy of British design. The utopia

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was a world of independent nations, each of them strong and rich. Only in this setting would mankind be able to realise their shared humanity. The National System allowed American, French or German policymakers to extract a list of recommendations setting their nations on a path of modernisation. This made List’s national ideas internationally transferable and explains the ease with which he himself was able to adopt his system from an American to a French or German context. Despite the scathing criticism to which List and his fellow nationalists subjected the ‘universalism’ of classical political economy, it was precisely the universal potential of the National System that embodied its greatest promise. Yet List never set out to liberate all nations. More accurately, List attached a number of prerequisites for a people to attain full nationhood that, if taken literally, would have severely limited the concept’s scope. First, tropical countries were by nature best suited to exchanging their primary commodities for the manufacturing products of temperate countries.185 According to List, ‘a country of the torrid zone would make a very fatal mistake, should it try to become a manufacturing country’.186 He acknowledged that such an international division of labour would entail dependency on the part of tropical countries, but argued that this dependency would provide them with important material benefits, including imports of manufactures. They would benefit from this arrangement as long as the market for manufacturing products was competitive and prices were kept low. List argued that this would happen if the British monopoly on manufacturing were replaced with competing industrial producers as envisaged by his system.187 Second, List opined that many regions of the world lacked the necessary degree of ‘civilisation’ to participate in a world of nations. Being at a low stage of development, such ‘barbarous’ regions should welcome colonisation by manufacturing nations to advance along the road to modernisation. The colony would gain from its subject status, because it would be able to establish direct trade links with the industrial metropolis, rather than trade through middle men.188 For the metropolis, such ventures would be profitable because imperial trade was in essence domestic trade, allowing it to cheaply access raw materials and markets for manufactured goods in its colonies. In addition, colonies could provide a vent for outmigration, with settlers spreading the culture of the metropolis to new lands. List evidently preferred such an arrangement to emigration to third countries, where migrants would eventually assimilate culturally and hence be lost to the home country.189 List may have justified colonial relationships as temporary arrangements on a countries’ road to development, but it is nevertheless remarkable how easily his system of nations evolves into a system of empires: ‘The crowning success of manufacturing industry, of internal and external trade, of a respectable naval power, lies in the possession of colonies.’190 Imperialism was the highest stage of national capitalism.

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Imperial subjugation, finally, was not only reserved for those benighted regions on the far side of the globe, but could also be extended to smaller European nations. List was adamant that Denmark and Holland should be incorporated, at the very least, into the German Zollverein. Holland was simply too small in territory, ‘men and intellectual power’, to exist as an independent state, let alone as a fully developed industrial nation.191 List presented this as a point of general principle: ‘A considerable population, and a vast territory, with varied resources, are essential elements of normal nationality, fundamental conditions of moral culture, as well as of material development and political power.’192 In other words, nations that did not have the capacity for development were better off joining those that did. This raises the question of List’s intent in restricting the applicability of his work to a handful of large economies. He was otherwise an avid salesman of ideas, so why reduce the global appeal of his system? To some degree, one may posit a lack of imagination. In making size the touchstone of ‘adequate’ nationality, or by positing that tropical countries could not develop, List was by no means exceptional for his time.193 He also uncritically followed other arguments about territory size that were widespread at the time, including the Fichtean doctrine of ‘natural boundaries’. For example, he believed that Holland was not only destined to be ruled by Germany because it was small, but also because it ‘naturally’ belonged to its neighbour: ‘From our natural point of view, we say and affirm that Holland is, by her geographical position, by her commercial and industrial relations, by the origin of her inhabitants and their language, a German province.’194 He differed from most of his contemporaries only in believing that such arrangements would ultimately benefit small nations. Moreover, List’s use of the historical method predisposed him to envisage global development occurring in the same manner as it had up to his own day. What he observed was a world of empires, where Britain as the largest industrial power commanded the most far-flung empire. The world of nations he envisaged therefore became a world of empires, with each empire crafted in Britain’s likeness.195 In the end, however, List’s adherence to contemporary European assumptions about nation size and empire signify more than a lack of imagination on his part. It points to deeper tensions within nationalist thought. List was aware of the dilemma between the desire for economic expansion and the simultaneous need for protection. A common argument by free-traders was that protection would lead to enterprises being confined to small markets, thus inhibiting specialisation and encouraging the emergence of inefficient monopolies. That List took such arguments seriously is evidenced by his insistence that tariffs be temporary, moderate and limited to manufacturing only.196 One way to further alleviate the adverse side effects of protection was to expand the extent of the territory behind tariff walls. Not only would this increase market

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size, but also improve access to raw materials and workers. List stated matterof-factly that A nation without extensive territory and of otherwise limited resources, which does not control the mouths of its rivers, or which has no suitable boundaries, cannot resort to the protective system, or at least cannot employ it with full success. It must be first enlarged by way of conquest or negotiation.197

List’s voluntary economic unions (‘negotiation’) and even his schemes for imperial expansion (‘conquest’) built on this idea.198 List himself may not have seen this as radical, but simply as unsentimental and realistic. It was precisely the adherence to ‘practical’ principles that contributed to the appeal of the National System. We also should not forget that, despite his attempts at scholarly detachment and global nationalism, List’s remained a passionate German nationalist. Most small states whose independence he sought to abrogate were neighbours of Germany standing in the way of its potential expansion. His insistence on voluntary associations of nations does not obviate the fact that List was advocating German continental hegemony, albeit in possible concert with France, rather than a truly supranational association of continental European states.199 Nonetheless, List’s focus on associations of nations sets him apart from twentieth-century visions of economic exploitation as promoted by the National Socialists (Section 5.3).200 In continually emphasising the benefits an association with Germany would supposedly bestow upon those nations unable to compete with Britain by themselves, List attempted to combine his patrie with the interests of humanité. That this was unconvincing was due to the inherent limitations of a nationalism that elevated the concept of the nation not because nations had an inherent value, but because nations held the capacity to exercise political and economic power.201 Like Henry Clay with his muddled vision for Latin America, List was unable to resolve the inherent tension between independent national development and imperial expansion in a world where nations competed for resources and power (Section 2.6). List’s attempt to paste over this contradiction by appealing to nations ‘true’ selfinterest required a leap of faith, a conviction that a harmony of interests could be achieved on a global level. It is here that List comes closest to his Romantic forebears Fichte and Müller, and their insistence on the compatibility of (German) nationalism with universal progress. Economic nationalism, in any case, did not remain the preserve of the rulers of the ‘large’ nations to whom List originally addressed his work. In a world dominated by multiethnic empires, movements based on minority nationalism could select some of List’s prescriptions to seek economic autonomy for their region or people. Ironically, the first country where the National System made

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an impact was Hungary, neither a fully independent nor a particularly large country. List’s teaching had found early dissemination in the country, where imperial connections to German-speaking Austria were extensive, so that the National System had seen its first translation into Hungarian already in 1843. Ideologically, his ideas were popularised as providing an alternative to mercantilism, physiocracy, classical and socialist economics. Politically, they constituted a programme for change palatable to landless members of the gentry, who had little to lose from a transition out of agriculture. One of the earliest converts was Lajos Kossuth (1802–94), a liberal democrat and radical nationalist, who in 1848–49 would lead a failed Hungarian uprising against Austrian rule.202 After reading List’s work in the early 1840s, Kossuth had been quick to apply its tenets to the local context, concluding that Hungarian national independence could only come with industrial development. To accomplish this, Magyar industry, which was scarcely existent at the time, would need protection from the more advanced manufactures of Hungary’s Austrian Habsburg overlords. Given the lack of tariff autonomy, Kosuth promoted a boycott of Austrian goods. With a group of committed compatriots, he founded a Protection Association (Védegylet) that collected pledges from citizens promising to abstain from Austrian imports. He also lobbied for import tariffs between Hungary and Vienna, as well as promoting infrastructure investments.203 From the point of view of List’s theory, the irony was twofold. Firstly, Hungarian attempts at economic nation-building sat uneasily with the demands of the linguistic minorities living within the Kingdom of Hungary. As we will see in Section 4.3, Romanian nationalists within Hungary developed their own demands for economic independence and they eventually fell back on using the National System as well.204 Secondly, it is noteworthy that List, invited by Kossuth to Hungary in 1844, supported Kossuth’s programme notwithstanding Hungary’s smallish size and its clear thrust against Germanspeaking Austria. In the National System, List had even maintained that both Austria and Hungary lay within the natural frontiers of a ‘German’ economic area. He had also emphasised the necessity of German colonisation of the Danubian lands. 205 Naturally, these parts of List’s programme were incompatible with the territorial demands of either the Hungarian or the Austrian leaders List met on his journey.206 The tension between an economic nationalism of hegemony and one of anti-imperial liberation was clear. At the same time, this did not deter Kossuth and his compatriots from extracting from the National System those recommendations concerning the creation and isolation of ‘national’ industries they found useful.207 As in Hungary, Polish separatists developed variants of economic nationalism to ward off imperial domination. Yet these attempts did not yet gain widespread traction. This was notwithstanding the fact that the ‘national’ question in Poland dominated intellectual debates. Its acuteness was

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heightened by the recent dismemberment of the old Polish Commonwealth by Prussia, Austria and Russia in 1795. Polish thinkers were divided between loyalism to imperial powers, armed insurrection and conciliatory reform.208 Although historiography usually describes the early nineteenth century as a period of Romantic insurrectionists, many Polish economic thinkers and politicians, acknowledging the military odds, drifted to the reform camp early on. In 1810, the economist Wawrzyniec Surowiecki (1769–1827) stressed that only the intertwined processes of industrial development and cultural growth would reactivate the Polish nation so that it could regain its former status.209 As an Enlightenment liberal, he advocated reforms curbing the power of the landed magnates and promoting free trade. At the same time, he was distrustful of whether industrialisation could be achieved through private initiative in a capital scarce country. He therefore called on the government to coordinate private activity, especially industrial investments, for the national benefit.210 It is noteworthy that in his advocacy of dirigisme he both precedes and exceeds List. Surowiecki’s ideas were taken up in a national emergency. In 1821, the government of Congress Poland, which was administered as an autonomous kingdom within the Russian Empire, was close to bankruptcy. At the same time, prices for Poland’s export grains were falling, threatening a balance of payments crisis. As a Polish crisis might have provoked total Russian annexation, Prince Ksawery Drucki-Lubecki (1778–1846), new Minister of the Treasury, raised taxes to stabilise the budget and introduced prohibitive import tariffs to save the trade balance. His ambitious programme, moreover, went beyond immediate exigency. In true Listian spirit, Drucki-Lubecki opined that, as a grain exporter, Poland would remain under the ‘yoke’ of foreign industry, and would never acquire the economic independence needed to safeguard its faltering political independence.211 He therefore embarked on an ambitious plan to fund Polish heavy industry through a new national bank, the Bank Polski, which directly funnelled tax revenues into industrial concerns in textiles, mining and metallurgy, as well as into infrastructure projects. Like Hamilton, Drucki-Lubecki hoped that his investments would create a community of industrialists closely tied to the government, with a stake in Poland’s long-term development.212 While his tariffs kept low-priced Prussian manufacturing products out of Polish markets, Drucki-Lubecki strove to maintain access to Russian export markets, where Polish products would be more competitive. These policies did lead to a wave of factory foundations, which continued even after Poland lost much of its autonomy in retaliation for its failed uprising against Russian rule in 1830. Nonetheless, many new factories were producing at only a fraction of their capacity. This was in part due to limited domestic demand, which in itself was a result of the high tax burden imposed by a government that preferred domestic sources of capital accumulation rather than foreign loans. In the end,

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the experiment was ended by the Russian Imperial authorities in 1843, who were fearful that a growing Polish industrial base might indeed provide the material means for a renewed push for independence.213 The Polish attempt at economic autonomy thus clashed with imperial power. Nonetheless, DruckiLubecki’s scheme was in curious ways dependent on the markets of the Russian Empire. Sluggish domestic demand for industrial output required access to export markets. This again necessitated economic integration with Russia, the same empire that threatened Polish independence. At the same time, Drucki-Lubecki’s scheme faced internal dissent. He was harshly criticised by liberals who lambasted his project’s dirigiste approach. For his opponents, ‘artificial’ stimuli by the government would distort Poland’s natural course of development, which should rest on endogenous growth in peasant agriculture. Liberal thinkers such as Fryderyk Skarbek (1792–1866) and Dominik Krysiński (1785–1853) also challenged the methodological nationalism that underlay the use of tax receipts for long-term industrial investments. These schemes could only be justified if nations were to exist independently of individuals. This they denied. State investment entailed a forced sacrifice of present tax payers on behalf of a different set of future individuals.214 These liberals thus recognised a connection between nationalism and capital accumulation. They were, however, unwilling to tolerate the violation of private utility implied by state-led accumulation. By mid-century, nationalist thinkers in Poland turned away from top-down developmental nationalism. Instead, they advanced the idea of ‘organic work’, which would allow for institutions based on bottom-up initiative (Section 4.3). In the first decades of the nineteenth century, anti-imperial nationalism was not yet the potent force it would eventually become in Europe. With the exception of the Hungarians, few separatist movements made explicit use of List’s theories and with the possible exception of Ireland, most movements were top-down affairs (Section 2.2). As the Polish case shows, liberal opposition to government intervention also remained strong.215 Yet from the 1860s onward, the potent elements of the National System – its regard for practicality and potential for transferability – would intersect with the increasing diffusion of nationalist ideas at the grassroots level. This allowed List’s ideas to exert a lasting influence on national liberation movements across the globe.

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4 The Globalisation of the Nation, 1861–1913

4.1 Introduction In the middle decades of the nineteenth century, governments around the world started to espouse free trade, first as a philosophy and then as a policy. The Cobden-Chevalier Treaty of 1860 between Britain and France was seen as marking the ascendancy of a new world order in which free exchange would weld nations ever closer together in a virtuous cycle of amity and commerce. There were of course exceptions to this trend: policy in the United States became increasingly restrictive after the Republican Party had committed itself to tariffs in 1861. At least from the perspective of European liberals, however, the economic nationalism of Carey, List and their followers could be depicted as a thing of the past, a failed attempt to save the remnants of an outdated system of mercantilist restrictions from the inexorable march of progress.1 The liberal vision of peace and progress through globalisation was not just a mirage. Trade volumes multiplied in the half century before the First World War, ushering in an age where Argentinian beef fed British workers and German machines spurred Russian industrialisation. European investment in the Americas surged, aided by the emergence of the gold standard as an almost universal system of fixed exchange rates. People moved too, and in vast numbers, from Italy to the United States, from Ireland to Australia and from Britain to South Africa. This was the world’s first true globalisation. As liberals posited, it was also a period of relative peace between the European great powers. Nonetheless, half a century later, this global liberal order was already unravelling after a slew of protectionist measures and migration restrictions had been implemented in key trading countries. The outbreak of the war and Europe’s descent into militarist nationalism killed off the last vestiges of the old order.2 The growth of nationalism in an era of integration may seem like a paradox. In reality, economic nationalism spread exactly because the world became increasingly interconnected. There are four key trends that explain the globalisation of economic nationalism. 76

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First, increased import competition threatened the perks of powerful interest groups who had an incentive to lobby for protection. European farmers lost out to grain producers from the Americas and Indian textiles were eclipsed by British imports. The resulting protectionism by the losers of integration constitutes the conventional narrative of the late nineteenth-century ‘backlash against globalisation’.3 What has received less attention from economists is that these interest groups provided a ready audience for increasingly radical nationalist ideologies. Germany is a case in point, where Listian ideas acquired a more aggressive flavour partially through the writings of academics such as Max Weber (1864–1920). He depicted economic competition as a Darwinian struggle for survival between nations. Such ideologies served to increase the cohesiveness of anti-globalisation interest groups, helped to craft winning coalitions between them and served to delegitimise proponents of free trade as traitors to the national cause. Second, globalising forces such as migration and free trade helped to spread nationalist ideas, including those of Friedrich List and Henry Carey, far beyond their places of origin in the United States and western Europe to areas that were now drawn into the expanding world economy. This process was particularly pronounced in two countries that were part of the British Empire: India and Ireland. The imperial connection gave rise to cosmopolitan nationalisms that drew on liberal economic thought prominent in the Anglosphere.4 However, political and economic domination by Britain also led elites in these colonies to incorporate List’s ideas in order to explore themes of exploitation and dependency. These abstract notions were mainstreamed by connecting them to colonial commodities of everyday use, such as land and textiles. This popularisation aided the emergence of influential mass movements promoting political and economic independence. Third, incipient globalisation accentuated the divergence in incomes between the industrialising countries of the north Atlantic and the old empires of Eurasia. In Russia, the Ottoman Empire and Japan, this divergence gave rise to powerful expansionist nationalisms that attempted policies of state-led industrialisation. In these states, Listian ideas interacted with local economic conditions and intellectual traditions to create ideologies that broadly accepted the need for integration into the world economy, but also attempted to manage this integration in a way that limited foreign economic influence. Finally, economic integration often interacted with local ethnic heterogeneity. This was the case in the Ottoman Empire, where commercially active Greek and Armenian minorities became a target for Young Turk nationalists, who blamed these groups for foreign economic penetration. In other cases, world market pressures disrupted the traditional division of labour in rural societies. For example, tough competition from more efficient grain producers in the Americas and Russia drove down grain prices across Europe in the 1870s. In confessionally diverse Ireland and within the Austro-Hungarian

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Empire, declining grain prices sharpened redistributive conflicts between ethno-confessional groups. In the multiethnic Habsburg Empire, these conflicts were increasingly interpreted as a nationalist struggle for land, capital and even consumer goods.5 In the last decades before World War I, nationalists in these regions sought to maximise their control over these resources to construct economically isolated ethno-nations, attempts that would eventually reign supreme in the 1930s.

4.2 Max Weber and the Struggle of Nations By the end of the nineteenth century, German intellectuals had developed an aggressive brand of expansionist economic nationalism. This expansion was predicated on assertive diplomacy and naval power to open up foreign markets and secure colonies. At the same time, domestic markets were to be guarded by tariff restrictions. This ideology had its roots in various agricultural and industrial interest groups that attempted to protect their market shares at home and abroad.6 Interest groups, however, were only able to mobilise popular support because they tapped into prevailing narratives about Germany’s place in the world economy. The first narrative was the well-known Listian argument that domestic protection needed to be complemented by extensive markets (Section 3.5). List’s thought remained relevant in Germany in part because it was championed by historically inclined economists such as Gustav von Schmoller (1838–1917). The second narrative was rooted in theories of Darwinian competition. Nationalists such as Max Weber and Adolph Wagner (1835–1917) were concerned about the perceived weakening position of Germans vis a vis Poles in the ethnically mixed eastern territories of the German Empire. They interpreted these local issues as a conflict over land and resources, which Weber believed echoed the struggles Germany as a whole faced on the global stage. Weber therefore conceived of the world economy as an arena of a competition between nations, where survival depended on an aggressive foreign policy that secured access to resources. *

When Friedrich List committed suicide on a cold November morning in 1846, the outlook for his creed was not bright. Free trade had just made inroads into British policy with the abolition of the protectionist Corn Laws. Over the next decades, free traders would also dominate the Zollverein, the customs union List had seen as a vehicle for German unity.7 National unification itself would soon seem remote: two years after List’s death, the liberal revolution to achieve a German nation-state would fail, apparently dooming the grand Listian project.8 To be sure, List’s academic work and his

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policy activism were well-known among economists and statesmen in Europe and the United States. Yet even in the German-speaking world, his reputation was far from assuming the towering proportions it would in later years. An early history of German economics by Karl Knies (1821–98) published in 1853 portrays List as merely one of several prominent protectionists, on an equal footing with Adam Müller.9 Knies mainly identified List with the debate between protectionists and free traders. This was by mid-century assumed to have resulted in a victory for the free traders, contributing to Knies’ lukewarm assessment of List’s legacy. Wilhelm Roscher (1817–94) expands on this treatment of List in the 1864 edition of his textbook on the principles of economics, but still mentions Müller more frequently.10 Nonetheless, List’s legacy endured in the German states even before he attained his canonical status in the 1870s. There are three reasons for his enduring relevance. First, List’s National System fit well into the increasing emphasis on historical methods in economic analysis propagated by leading academics such as Knies and Roscher. Both authors stressed that historical comparisons between different peoples and nations could shed light on the way economic principles operated in practice.11 They acknowledged their debt to List’s use of economic history in the National System, even as they criticised the coarseness of his historical stage theory.12 Second, many historicist writers followed List in his critique of classical political economy. They emphasised the specificity of local experiences, which precluded a straightforward application of the universal laws of Adam Smith and David Ricardo. This is most clearly seen in the work of Gustav von Schmoller, the patriarch of historicism who dominated German economics at the end of the century. For Schmoller, who is often seen as the leader of a distinct German Historical School, only a detailed study of (German) history at the expense of (classical) theory could present solutions to contemporary policy problems.13 This was taking a page out of List’s book. The third overlap between the historicists and List was their affinity to nationalist ideas. This flowed from the historicist emphasis on the contextual uniqueness of each nation. Schmoller, for instance, believed in a distinct collectivist character of the German people that needed to be defended by the state.14 In fact, many of the famous social policy initiatives launched by Schmoller and his associates were expressly justified as exercises in nationbuilding. Schmoller saw industrialisation as indispensable for national progress, but also found that it came at costs in the form of unemployment, pauperism and the growth of a rebellious industrial proletariat. These were of course the same concerns French protectionists had written about (Section 3.2). Schmoller’s solution was focussed not only on tariffs, but also on social policy. In particular, social security was to prevent these corrosive forces from undermining national unity and stability. These arguments proved convincing enough to shape social policy not just in Germany, but also in other

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countries where the German Historical School was to become influential in the decades before World War I. This is most apparent in the Ottoman Empire and Japan, where an acceptance of ‘German’ social policy went hand in hand with the dissemination of older Listian ideas (Section 4.5).15 List’s posthumous induction into the Valhalla of German economists, however, did not just result from the writings of historicist economists. It stemmed from the fact that contemporaries increasingly believed that List had evened the way for German unification and industrialisation. The expansion of markets in the 1850s and 1860s had led to a rapid growth in heavy industries, particularly in the Rhineland. This boom was intimately connected to the rapid expansion of the German railway system, a Listian staple. These developments not only seemed to justify List’s faith in industry, but also created a bourgeois constituency for his ideas. Most pertinently, the Zollverein eventually grew under Prussian leadership to encompass all German lands to the exclusion of Austria, connecting consumers and producers between the Baltic and the Alps. The economic unity of the Zollverein was seen as a trailblazer for the German national unification that was realised by Otto von Bismarck (1815–98) on the back of his military victory over France in 1871.16 The founding of the German Empire dramatically altered perceptions of List. ‘He is virtually a prophet for many of the most important practical questions in economics and policy of our times’, Roscher effusively praised List three years later, ‘almost everything that List strove to achieve for Germany had been realised wholly or in part even by the time of his death’.17 With a delay of thirty years, List had been transformed from a moderately successful economist into the far-sighted progenitor of the German nation-state.18 Subsequently, List’s reputation for prophecy has at times assumed almost mythical proportions. He has been credited with foreseeing, under varying degrees of plausibility: World War I and the German defeat therein,19 Germany’s social market economy after World War II,20 and the European Union.21 Most importantly, in the eyes of domestic and foreign observers, List was after 1871 firmly associated with Bismarck’s successful unification. This link was largely apocryphal: The two men never met, Bismarck most likely did not read List’s work until 1877, and Bismarck’s nationalism was of a more tactical nature than List’s.22 Quite regardless of its validity, the identification of List with notions of German unification, industrialisation, and Bismarckian power was a tremendous selling point for his doctrines. For example, Sergei Witte (1849–1915), the enterprising Russian Finance Minister of the 1890s, remained convinced that ‘List’s National System has a place on the bedside table of the Prince [Bismarck]’.23 Such hagiography proved to be vital in the spread of the Listian brand at home and abroad. List’s commanding posthumous influence also played a large role in crafting German protectionist policy after unification. Tariffs had long been a demand of industrialists in iron and textiles, who feared displacement in their home

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markets by imports. Their demands intensified when output prices collapsed around the world in the mid-1870s, slashing profits and intensifying competition. Agricultural producers, often landed magnates, were under similar pressure as grain prices plummeted.24 Industrialists and the landed aristocracy were not natural allies, but economic nationalism proved to be the glue that welded these two interest groups together and mobilised broad public backing for their tariff proposals. German industrialists founded a ‘List Committee’ to market their case for protection from British competition. As German industry had largely outgrown its infancy, industry representatives sold their proposals as ‘the development of the national spirit in economic policy’.25 Henry Carey’s works were imported from the United States to bolster the case for a balanced economy of industry and agriculture, which helped to bring farmers and the landed aristocracy into the coalition. Most importantly, the tariffs were marketed by a well-oiled public relations machine as a ‘Defence of National Labour’. This was a straight translation of the French motto ‘Défense du Travail National’ used there in the early 1840s.26 This portrayal of tariffs as safeguarding the welfare of working Germans against foreign domination (‘Germany for the Germans’) helped to mobilise broader sections of the population. Tariff lobbyists also attained this goal by orchestrating a ‘grassroots’ campaign that encouraged citizens to petition the government in favour of tariff reform.27 The emphasis on ‘national labour’ also meshed well with the Historical School’s interventionist stance on social policy. Schmoller and many of his colleagues from the economics profession publicly endorsed tariffs as a way to project ‘solidarity and unity’ abroad. History had shown, Schmoller declared, that only nations with a ‘tenacious, energetic, merciless national egoism’ would advance.28 This furthered Chancellor Bismarck’s aim of domestic unification against internal and external enemies. In this incensed atmosphere, it was easy to brand liberal economists and parliamentarians as enemies of the nation, which Bismarck did with his usual acidity: ‘Scholars, orators, and negative elements’, he intoned, should start defending ‘the material interests of the nation’ and ‘submit to the economic demands of the producing population or vacate their parliamentary seats’.29 The 1879 tariff turned out to be a landmark victory for economic nationalism in Germany. In addition to commanding a majority in parliament, the bill could also count upon broad support within the German population.30 Its repercussions stretched beyond Germany. The country’s centrality in the European trading network caused other governments to retaliate by raising trade barriers of their own, so that the German tariff was an important step in the slow unravelling of the global economy before World War I.31 The heated tariff debates also marked a deeper shift in nationalist discourse within Germany. Over the subsequent decades, German economic nationalism became ever more aggressively outward-oriented, in particular in its urge for territorial expansion. This was partially a consequence of the rising tariff

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barriers in Germany’s trading partners, because these restricted regular access to foreign markets. Territorial expansion, of course, had been part and parcel of List’s National System. List regarded access to markets as an important engine of growth, and market access always had to be supported by an expansion of political control through colonisation, trade treaties or customs unions. Within Europe, however, List’s method of political control had largely been confined to voluntary unions that were embedded in a universalistic narrative of progress (Section 3.5). These caveats were easily brushed aside in the late nineteenth century when globally increasing trade barriers, themselves partially a consequence of (German) economic nationalism, made access to an extensive market beyond Germany proper more expensive. This required other means of securing an outlet for German products. For many German writers in the 1880s and 1890s, expansion therefore took on a much more militant and uncompromising quality. Market access was now to be ruthlessly pursued through aggressive diplomacy or even at the point of a bayonet.32 The drive to expand markets also rested on the belief, nurtured in the preceding tariff debates, that Germany’s success on the world stage was synonymous with that of her heavy industries.33 These industries required access to export markets to flourish, and in light of worsening external relations, it was held that such access could only be guaranteed through military or political means. Hence German foreign policy increasingly focused on bilateral trade treaties securing foreign market access, while its armaments policy spurred the construction of a high-seas navy. This naval build-up was not just a reflection of popular dreams of global power status, but was intimately connected with calls for the protection of German trade routes. Moreover, a blue water navy was seen as instrumental in securing access to colonies and therefore raw materials, following List’s dictum that a navy and colonies were the crowning achievement of a trading nation. Given this economic rationale, naval armaments were vocally supported by nationalist economists such as Schmoller, who joined the ranks of the Flottenprofessoren (Professors of the Navy).34 In this imperialist discourse, tariffs did still play a role, but protection of domestic markets was now interpreted as securing a home base from which the conquest of foreign markets could commence ‘just as an army can conduct successful sorties from a fortress’.35 The aggressiveness of German economic nationalism in the 1890s and its underlying causes are thrown into even sharper relief by a brief comparison to the United States and France, the two other countries closely related to the development of the Listian doctrine. In France, as in Germany, the economic nationalist movement grew in influence in the 1870s. It could partly draw on the personal networks and ideas that had formed forty years earlier when List was staying in France (Section 3.2).36 The movement’s crowning achievement was the passage of

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the Méline tariff in 1892.37 Similar to the German tariff proposals of the preceding decades, the Méline tariff offered protection to both agriculture and industry. Its creators also marshalled the argument of social peace and travail national.38 However, the purpose behind the tariff was quite different. This is evidenced by the writings of the economist Paul Cauwès (1843–1917), the mind behind the tariff.39 Cauwès was an isolationist nationalist. He faithfully declared his devotion to traditional French protectionists as well as to ‘List and Carey [who] formulated the theory of protection of national industry’.40 In fact, he was closer to Carey, largely because of his focus on a balanced economy. Cauwès arrived at this stance through a critique of market competition, believing that cooperation within the national community, rather than domestic rivalries, would bring social progress and distributive justice.41 Cooperation could only be achieved in stable economic conditions. Economic stability, in turn, required a mixed economy where domestic agricultural and industrial producers were mutually dependent on each other. Reliance on foreign markets could only disturb this symbiosis.42 Cauwès propagated an ideology of domestic cooperation and security that had much to do with prior French thinking on the subject. French economic nationalism even during the 1890s thus remained essentially inward-looking and averse to competition, unlike its expansionist German counterpart.43 The heated rhetoric in the United States bore greater resemblance to that in Germany. Henry Carey’s lobbying had firmly transformed the Republican Party into the party of economic nationalism by the outbreak of the Civil War (Section 2.5). The Republicans remained the dominant party from the end of the war in 1865 to 1913. Even more so than in Germany, tariff protection became so deeply ingrained in the public discourse as a symbol of national defence that American nationhood was gradually seen as almost synonymous with the tariff rate. Democratic free-traders could easily be brushed off as stooges of English imperialism, whose nefarious conspiracy to spread the menace of open borders needed to be thwarted at all costs.44 As in Germany, the protection of American labourers against ‘unfair’ low-wage competition was an important element in maintaining a broad coalition of social forces that justified successive increases in the tariff schedule. It was also used to justify restrictions on the entry of low-wage labour, especially from China (in which case economic fears were compounded by racial resentments). The rallying cry of ‘America for Americans’ also echoed the slogans used on the other side of the Atlantic.45 And although general restrictions limiting migration from southern and eastern Europe were not passed until after the World War, discussions on this topic started as early as the 1890s.46 The key difference with Germany was that the American nationalist consensus, by and large, remained focused on the ‘preservation’ of the home community rather than on foreign expansion. This did not mean that expansionist ideas did not develop. They clearly did – but there was no general

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correlation between those factions espousing expansionism abroad and those championing protection at home. Some associated the rise of a putative ‘American Empire’ with free trade, rather than protection.47 Other politicians espoused free trade and anti-imperialism, such as Grover Cleveland, who was the only Democrat to break the Republican monopoly on the presidency during this period. It is true that some Republican factions did advocate protection and expansion, especially as US exports picked up strongly in the 1890s. During this period, the administration of William McKinley (1897– 1901) attempted to gain market access in the Americas, while simultaneously keeping home tariffs high. This is the closest the United States came to a protectionist empire in the Western Hemisphere in the mould of Henry Clay’s continent-wide American System (Section 2.6).48 Yet as in Clay’s own days, the traction of this vision was limited. The Republican mainstream remained on the side of domestic protection and opposed foreign expansion, fearing that it would undermine the integrity of the American tariff fortress. Overall, despite loud clamouring, American export interests were too weak to decisively shape policy in the outgoing nineteenth century, so that the German trinity of domestic protection, foreign expansion and naval supremacy did not command the same degree of support.49 Differences in economic structure matter to some degree in explaining the comparative isolationism of the United States and France. The US home market was almost twice the size of the German one by the start of the World War, thus making isolation viable. Industrialisation and international trade links grew at a slower pace in France than in Germany, giving more political clout to domestic agriculture. Yet such factors are easy to overstate. In 1870, the share of the population employed in industry was broadly equal in Germany and France. In 1913, it stood at 38 per cent in Germany and 33 per cent in France, signifying a relatively small growth differential over a period of more than four decades. The German economy was more dependent on external trade, but the difference was again slight: The trade-to-GDP ratio in Germany exceeded the French one by only 2 percentage points in the 1890s. And French efforts at imperialism were clearly more effective than German (or American) attempts. It was France who possessed a large intercontinental empire spanning Africa and South-East Asia, yet Cauwès was mainly concerned with supporting French vineyards, not securing overseas markets for French steel producers.50 German expansionism thus cannot be solely explained by the dominance of export industries or by the legacy of a Listian emphasis on market access. An additional reason for its aggressiveness was the tendency of German intellectuals to understand economic competition as an existential struggle between ethnically defined nations. Two factors made German intellectuals receptive to this idea. One was ethnic and confessional conflict within Germany itself, which was interpreted as a struggle for resources that was increasingly

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projected unto the world stage. The second was the preponderance of social Darwinism with its emphasis on competition and survival. Both factors were mutually reinforcing, and both find their starkest expression in the thundering 1895 Inaugural Lecture of a young economics professor and self-described ‘economic nationalist’: Max Weber.51 Weber does not ground his views as an expansive economic nationalist in observations on tariff policy or global trade. Instead, he draws the attention of his audience to the eastern provinces of the German Empire. These provinces had been part of the independent Polish Commonwealth in the eighteenth century. A century after their annexation, they were still marked by an ethnically diverse population consisting of (largely) Protestant Germans and Catholic Poles. Jews constituted a third, but numerically much smaller, group in many localities. Weber focussed on what he saw as economic competition between these groups. The expansion of markets and the commercialisation of rural life had, Weber emphasised, eroded the paternalistic structures by which traditional noble landowners had maintained social order. In their place, market competition now ruled, pitting landowners, small farmers and landless labourers against each other.52 For Weber, this competition played out as a struggle between ethnicities or ‘nationalities’. This was because ethnic identity coincided with economic function. Although this was partly accurate, Weber clearly overstated the degree to which this conflict was inherently ethnic (see Section 4.3). Like many of his compatriots, Weber summarily saw Germans as the bearers of economic civilisation and progress in the East, while ‘the Poles have the tendency to assemble themselves in the economically and socially most inferior segment of the population’.53 This was due to ‘a differential ability of both nationalities to adapt to different economic and social conditions, rooted in physical and psychological qualities of these races’.54 Weber believed that Germans possessed a superior intellect and work ethic, but he was nonetheless pessimistic regarding their chances of victory. In fact, Weber claimed, it was precisely their advanced standard of living which made Germans increasingly unable to survive under intensifying market competition. Cut-throat competition favoured those who maintained ‘lower expectations regarding their standard of living – materially and culturally’. Weber speculated that these were characteristics, ‘with which the Slavic race was either naturally endowed or had acquired in a long process of natural selection [angezüchtet]’ and which had now ‘led it to victory’.55 The result was an ‘economic displacement’ of Germans in the East, Weber feared.56 As Germans were forced out, he complained, they were replaced by ‘Polish migrant labourers, treks of nomads, hired through agents in Russia, who come in springtime over the border in their tens of thousands, leaving again in Autumn’.57 Germans’ inability to compete on their own soil opened the door to an influx of migrants.

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In effect, Weber turned the Listian logic, according to which civilisational progress and economic success were mutually reinforcing, on its head. Economic advancement was a burden, according to Weber, carrying within it the seeds of its own destruction in competition against an enemy that was prepared to ‘eat the grass of the ground’.58 Weber’s depiction also rested on a perverse role reversal. He cast Poles, who constituted a politically repressed minority within Germany, in the role of the aggressors, while the German nation was bestowed with the moral mantle of victimhood. This victimhood justified uncompromising action by the German state on behalf of the hardpressed German nation. The eastern border, Weber argued, should be permanently closed to prevent further Slavic migrants from crossing. Moreover, the German state was to settle German farmers on Polish land.59 Weber then proceeded to look beyond the contested eastern provinces. The interethnic struggle in these areas, he believed, mirrored the larger competition between nations taking place on the global stage. ‘The national economic community is only another form of fighting with one another’, Weber declared. This international battle was inevitable, because ‘[t]here is no peace in this economic struggle for survival’.60 As in the eastern provinces, Germans could be sure the victor would not be determined by merit in free and peaceful commerce. In this ever-raging competition, there were no higher principles or objectives that economic policy could adhere to other than ‘the eternal struggle for the preservation and cultivation of our national kind’.61 This goal, Weber declared ‘is sovereign for us economic nationalists’.62 Using all means at its disposal, aggressive foreign policy (Weltpolitik) should defend the nation’s market share abroad and make the nation fit for survival.63 Weber’s Inaugural Lecture was not easily digestible, even for a German audience well-versed in nationalist jingoism. A far cry from Schmoller’s dense tomes and List’s optimistic liberalism, Weber’s words were sharp and uncompromising, his assumptions plainly stated and his assertions about demographic change in the East illustrated by carefully selected statistical material.64 This gave Weber’s conclusions an air of scientific authority not achieved by much of the writing of the German Historical School. And the Inaugural Lecture was not a one-off aberration of an otherwise great social scientist: its theme continued Weber’s earlier musings on the situation in the East, where he had advocated colonisation by German freehold settlers.65 And although Weber moderated his tone later in his sociological career, he remained a committed German nationalist.66 He was a long-time member of the notorious Alldeutscher Verband, a pan-Germanic association aimed at securing land and resources for Germans in the East that was well-known for its Darwinist views.67 Furthermore, Weber’s subsequent famous exaltation of the Protestant Ethic and the Spirit of Capitalism was also the evocation of a Protestant spirit he saw as fundamental to German success.68 It is therefore a mistake to view Weber’s later sociological writings as fundamentally distinct

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from his earlier views as a national economist.69 Fifteen years after the splash caused by his 1895 Inaugural Lecture, Weber would, with some justification, see himself as a pioneer of expansionist nationalism in the German economic discourse.70 Weber’s work was reflective of wider intellectual trends in Germany in two ways. First, although Weber’s use of language can be only imperfectly conveyed in translation, his German was soaked in biological metaphors, evoking ideas of selection, breeding and mutually exclusive species. The argument itself rested on the premise of a struggle for survival between cohesive ethnic groups, the outcome of which was decided by inherent ethnic characteristics and their interaction with the natural environment. This collectivist variant of social Darwinism played a much less prominent role in other countries (including the USA), but it was prevalent among German social scientists in the final decades of the century. It was precisely this social Darwinism that lend German economic nationalism its life-or-death attitude.71 Second, Weber used the local ‘struggle’ between Germans and Poles for land in the eastern provinces to justify global competition between nations for markets and resources. This linked together a number of widespread German fears at a time: demographic shifts in favour of the domestic Polish minority, the immigration of ‘inferior’ Slavic peoples over a porous eastern border and the paranoia of German economic decline in the face of cut-throat competition from abroad. For Weber’s audience, the conflict in the eastern provinces represented in miniature the conflicts the newly unified nation would face on the world stage.72 An understanding of the rise of economic nationalism in the late nineteenth century therefore requires an understanding of the microeconomics of ethnic conflict in Central Europe. We will turn to this topic in the next section, but before doing so it is important to stress that Weber’s and Schmoller’s brand of expansionism was not the only way German economists processed the double menace of internal strife and global competition. Another option was isolation. Such a version of economic nationalism was formulated by Adolph Wagner (1835–1917). Wagner, as professor in Berlin one of the most influential economists in Germany’s academic hierarchy, casts a long and ambivalent shadow on subsequent nationalist thought. Despite being a committed chauvinist, he exercised a profound influence on his students beyond Germany. These included W. E. B. Du Bois, the African-American civil rights leader (Section 6.4) and Arthur Ruppin, one of the pioneers of Jewish settlement in Palestine (Section 5.4).73 At the time, Wagner was best known for his vocal support of rural development. Wagner cautioned that the quest for industrial exports would invite dependence on foreign markets, thus limiting Germany’s ability to conduct policy independently.74 In the spirit of Johann Gottlieb Fichte, Wagner also saw the fight for market share abroad as breeding an egotistic spirit of

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competition and conflict at home.75 Such mercantile competition was not worthy of the noble German ‘species’, Wagner conjectured, and was better left to such fickle individualists like Jews or Armenians.76 Instead of industrial expansion abroad, the focus of economic policy should be ‘the preservation of the German Volk presently and into the future’.77 National preservation, which for Wagner had strong biological connotations, was critically endangered by the increasing reliance on imported food. Foreign trade should therefore be restricted to essential commodities not producible in Germany, while high tariffs on foodstuffs would ‘strengthen our agriculture, as the basis of a modern national economy, making it capable of employing a greater number of our people profitably in the countryside’.78 These rural communities would revitalise German civilisation against the ‘cosmopolitanism’ of urban culture.79 Wagner’s conclusions essentially rested on a series of unprovable value statements tenuously connected by economic theory. He shared this argumentative deficit with several members of the German Historical School, including Schmoller.80 But this did not limit Wagner’s confidence in putting his ideas into practice. Like most of his colleagues, Wagner was politically active in nationalist associations, most notably in the Ostmarkenverein, a virulently racist club dedicated to ensuring the rural settlement of ethnic Germans at the expense of Poles in the eastern provinces of the Empire.81 His relentless agitation for rural isolation found reflection in the increased grain tariffs of 1902.82 Beyond that, Wagner’s rural protectionism did not seriously endanger the entrenched position of German export industry or the primacy of naval armaments. Rather, Wagner’s dissent shows two things. First, disagreement with the dominant paradigm of expansionism could be formulated from an isolationist perspective, but it often remained within the nationalist tradition. Wagner did not question the nationalist framework itself. Second, although the conclusions he drew were different, Wagner followed Weber in espousing ethnocentric and biological notions of a Darwinian struggle. He also focused on the situation in the eastern provinces. It is to this region that we now turn.

4.3 Conflict and Cooperation in East-Central Europe The multiethnic societies of East-Central Europe were rapidly integrating into the global economy in the mid-nineteenth century, largely in their role as agricultural exporters. Yet the fall in grain prices in the 1870s upset the delicate ethnic division of labour that had characterised production in the region. Repressive policies by German, Russian, and to a lesser extent AustroHungarian, imperial governments further fuelled discontent. Polish, Romanian and Czech nationalists reacted to these pressures by attempting to construct ethnically defined economies that would operate separately from those of their imperial overlords. As they did not have access to a state apparatus, they used boycotts, voluntary associations and credit cooperatives

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to reorganise consumption, ownership and investment along ethnic lines. In doing so, they looked to balance the desire for ethnic isolation against the need to secure finance or supplies from non-nationals. Without these, even nationalist credit institutions could not finance projects to transform the region’s rural economies.83 *

‘The economics of the nationality struggle is so interesting, because it reveals, beneath well-known ordinary covers and forms, such strange and remarkable content’, wrote the German economist Ludwig Bernhard in 1907 in his account of the conflict between Poles and Germans in the eastern provinces of the German Empire.84 Polish farmers, traders and financiers had built a network of cooperatives, banks and associations in this region that laid the corner stone for a distinct Polish underground economy. ‘These institutes’, Bernard continued, ‘which do not [officially] engage in politics, are to such an extreme extent instruments of nationality politics, that their management bears peculiar traits to equip them for battle and national defence’.85 The situation Bernard described was part of a larger phenomenon in the contested and ethnically heterogeneous borderlands of the German, Austrian and Russian empires.86 At the heart of these borderlands lay Poland herself, shorn of her statehood after 1795 and divided between the three empires. Millions of Poles were now left to cope with their increasingly precarious status as an ethnic minority facing off against encroachment by imperial authorities.87 There was Austrian Bohemia, where the lines of conflict between Czech and German businesses were continually redrawn.88 And there was Hungarian Transylvania, where questions of landownership and trading rights increasingly pitted Hungarian nobles against Romanian farmers and German craftsmen. For the Hungarian gentry the roles had been essentially reversed: In the 1840s they had, with List’s support, striven for economic independence from a dominant Austria (Section 3.5). Now, with their autonomy in the Austro-Hungarian Empire guaranteed by the Compromise of 1867, they struggled to contain a resurgent Romanian minority on their south-eastern border.89 These conflicts were not just rooted in ethnic heterogeneity. Poland, Bohemia and Hungary, for all their differences, were also regions in which economic inequalities were deeply rooted. Serfdom had persisted longer than in Western Europe, and the distribution of land remained highly unequal. This mattered, as agriculture remained economically predominant and capital for industrial ventures was scarce (with Bohemia as a possible exception).90 Economic inequalities became politicised because they frequently coincided with ethnic fissures. In Russian Poland, textile workers were often Polish, factory managers were German and state authorities were Russian.91 In

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Transylvania, many crafts were traditionally German, small-scale farming tended to be carried out by Romanians, while most land was owned by Hungarian nobles. In Bohemia and Poland, informal credit provision to Czech, Polish or German farmers had traditionally been undertaken by Jews.92 In the second half of the nineteenth century, this traditional ethnic division of labour came under pressure. Changing birth rates and outmigration shifted regions’ demographic compositions, often in favour of ethnic minorities. Technological change and falling output prices slashed profit margins for noble estates and as a result, landowners often chose to sell their holdings. In their place came small farmers, often from ethnic minorities, or large commercialised estates with a seasonal migrant work force. This was most visible in German Poland, as Weber had argued in his Inaugural Lecture, where emigration by Germans (and Jews) coupled with higher Polish birth rates meant that ‘the Poles are gaining ground’.93 This was meant quite literally: the rising ownership of land by Poles stirred paranoia in Berlin just as the ascendancy of Romanian freehold farmers raised blood pressures in Budapest.94 Farmland was seen not merely as an economic asset, but, in the terminology of Czech nationalists, as ‘national property’. This was more than just rhetoric. Rather than acting as individuals in local property markets, Poles, Romanians and Czechs often bundled their purchasing power in land associations or land banks. Acting as a group, they could outbid potential German or Hungarian competitors, purchase larger plots and pressure co-nationals not to sell to ethnic outsiders.95 In German Poland, these ‘institutions of war’, Bernhard claimed, were ‘the outermost spear point of Polish capital, always ready for the thrust’.96 What Bernhard, Weber and other German observers failed to mention was that the capacity of Poles to act in unison was itself a reaction to intervention in the land market by the German (or more precisely, Prussian) government. Championed by economists such as Weber and Wagner, the Prussian Settlement Commission was set up in 1886 to buy Polish lands and distribute these to German settlers. The Prussian government also reserved the right to confiscate Polish property, thus illustrating the length to which authorities were willing to go to alter the ethnic balance of land ownership. The direct economic effect of these measures was not large – the power to confiscate was rarely invoked and the presence of the Settlement Commission actually induced German farmers to sell their plots and migrate west. Attempts at statesponsored German colonisation did, however, encourage Polish land buyers to bond together. Polish intellectuals started to understand collective land purchases as a way to secure the economic basis for a national revival and as a tool to strengthen the cohesiveness of Polish communities.97 The conflicts in East-Central Europe should therefore not just be seen as frictions surrounding the control of land, capital or retail trades that just happened to be loaded in ethnic terms. They were an integral part of

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nation-building, and were understood as such by contemporaries.98 It is therefore unsurprising that Listian ideas on the symbiotic relationship between economic prowess and national vitality were an integral part of these efforts. List’s ideas circulated as early as the 1840s among the region’s spread-out German-speaking population, and List’s early influence among Hungarian leaders has already been discussed (Section 3.5).99 Czech credit cooperatives were equally fond of using List’s ideas on the importance of credit for local industry.100 Romanian nationalists in Hungarian Transylvania benefited from the presence of an independent Romanian state in their vicinity, where List’s ideas had become government policy. The principalities constituting the Romanian state had been traditional exporters of grain and were therefore hit hard by the global decline in grain prices. This raised the attractiveness of a governmentsponsored industrialisation strategy, which was worked out by Petre S. Aurelian (1833–1909), a long-time cabinet minister. Aurelian had picked up List’s ideas while visiting Paris and Vienna, and saw his protectionism as naturally suited for newly independent Romania to build up its own industrial base. Aurelian published widely on List in the 1870s, and sponsored the first translation of the National System into Romanian. Listian thought became firmly entrenched in the economic discourse of the Romanian state and quickly spread to Romanians living under Hungarian suzerainty across the border.101 While List’s elegy of national economics fell on fertile ground, his policy recommendations could not be readily adopted by ethnic activists lacking their own state apparatus in Transylvania, Poland or Bohemia. Instead, they looked to create collective associations of compatriots to mimic protectionist policy. The Hungarian Védegylet had been the first association to argue that ‘since we cannot establish customs protection on our borders, we will have to set up ramparts at the thresholds of our own homes’.102 Its example was followed by other nationalities. A Romanian economist, Vasile Osvadă (1875–1931), promoted the idea that the core of List’s ideas did not consist of state intervention, but in the building of institutions creating national wealth. This could be done by nations without a state and Osvadă went on to build a dense network of Romanian credit institutes in Transylvania.103 Similarly, Polish politicians had learnt from the failure of top-down industrialisation in the style of Drucki-Lubecki, as well as from the bloodshed of heroic yet futile rebellions (Section 3.5). From midcentury onwards, Polish gentry and Catholic clergymen promoted organic work (praca organiczna); the diligent building of small-scale local institutions that would allow Polish cultural and economic life to flourish separate from the economies dominated by imperial occupiers.104 Voluntary ethnic segregation, or ‘by ourselves, for ourselves’ became the guiding motto of Polish, Romanian and Czech nationalists.105

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By the 1890s, ethnic segregation had morphed into active competition between nationalities in many parts of East-Central Europe. In a region where ethnicities were traditionally specialised in single occupations, few national groups controlled the complete value chain of production from farm to table.106 Building a segregated economy under these circumstances was fraught with conflict, because it necessitated dislodging ‘foreign’ artisans, retailers or financiers. In many regions, Jews were stigmatised as alien middlemen by national activists. The Polish national movement radicalised under the intellectual leadership of Roman Dmowski (1864–1939) and acquired a sharp antisemitic edge.107 The Czech movement found its moderate bourgeois leadership from Prague displaced by more extremist elements from the Czech borderlands, which pressed for the replacement of Jewish and German retailers as the main national objective.108 The prime weapon in the arsenal of these national activists was the boycott. The tactic had been imported from Ireland, where it had been in use since the eighteenth century, although the name dated from the Irish Land Wars of 1879 onwards (Section 5.4).109 Boycotts were used with fervour by most of the smaller emerging nations, as well as Germans, within the Habsburg Empire after the turn of the century. Shoppers were exhorted to only purchase in retail outlets owned by co-nationals: Deutsche! Kauft nur bei Deutschen (‘Germans! Only buy from Germans!’) as one sign in Bohemia read. The distinct labelling of shops and inns as belonging to a particular ethnic group was key to these campaigns. This signposting was carried out by dedicated activists, who also cooperated with nationalist newspapers to publicly ostracise boycott breakers. Such campaigns relied on national fervour that could not be sustained indefinitely, and the Austrian government eventually moved to outlaw calls for ethnic discrimination in commercial transactions. Yet such prohibitions were only partially effective, and the boycott movement continued to shape interethnic relations in Bohemia and elsewhere after their peak in 1908–10.110 Sometimes, boycotts fed into attempts to institutionalise discriminatory trade networks. For example, Polish textile workers in Russia created a cooperative network to source raw materials from Polish farmers and sell their produce in exclusively Polish cooperative shops.111 The cooperative movement was in many ways the workhorse of central European economic nationalism and its legacy was more durable than land associations and boycott agitations. The operation of cooperatives also shows how economic and ideological factors interacted to create and stabilise national movements. This qualifies Weber’s view of national competition as a natural state of affairs. Cooperatives were rarely founded to serve as instruments in a predetermined ‘national struggle’. Instead, they emerged from the need by town and country dwellers to cope with the challenges of the commercialised world economy. Farmers in Central Europe as elsewhere found the profitability of traditional grain production eroded by falling prices for staple

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foods.112 Artisans working with the time-honoured tools of craft production found their livelihood undermined by mechanisation and the abolition of protective guilds.113 The new economy provided opportunities too – farmers could transition to more profitable dairy or meat production, and artisans could mechanise and produce for growing markets. Yet capital scarcity made such a course of action difficult in the European periphery. Cooperatives, especially credit cooperatives, provided a way out. Farmers or artisans could pool their capital and fund investment projects that helped them to upscale or modernise production. Joint liability, that is the requirement for each member to vouch for their co-members, made cooperators wary of taking uneconomical risks. This was a recipe for success, and credit cooperatives spread from their place of origin in western Germany to most of East-Central Europe. Just before the World War, about one quarter of the adult male population in German Poland was a member, making the cooperative movement a mass movement.114 There were, however, economic incentives that favoured the ethnic segregation of cooperatives. Linguistic barriers facilitated the conduct of business within ethnic groups in a region were language and ethnicity were coterminous. Moreover, successful joint liability investment required mutual trust. This relied on existing kinship networks in the villages, which in turn had often evolved along ethnic lines. Cooperatives therefore often separated by ethnicity.115 This was quite to the liking of nationalist activists, who saw segregated cooperatives as a way to forge bonds of mutual dependence and aid among compatriots. These activists were often clergymen, or members of the cultural intelligentsia, such as journalists.116 In Transylvania, both Hungarian and Romanian nationalist associations set up their ‘own’ credit cooperatives, providing them with management and marketing support.117 Under the influence of nationalist entrepreneurs, cooperatives began to pursue segregation on purpose and their members came to see investment with co-nationals as the principal aim of their organisations. This was believed to reduce dependence on ‘foreign’ capital: ‘A Romanian national credit institute . . .’, activists declared upon the founding of one Transylvanian cooperative, ‘should satisfy the need of capital of our people, and should free them from the alien influence and economic slavery, from the shameful role to be always the debtor of alien capital’.118 According to this mindset, any economic interaction with outsiders was a depletion of national capital. This shrill and often antisemitic rhetoric was used to adorn otherwise dry accounting books. In German Poland, meetings of Polish credit cooperatives were so drenched in nationalist agitation that their gatherings were monitored by the police, who carefully checked their balance sheets for hints of suspicious activity. Their German competitors, needless to say, escaped such treatment, although their nationalism was no less fierce.119 The result, observers complained, was an ‘era of merciless animosity, which leaves no possible means unutilized. A struggle that has changed the moral atmosphere in the East’.120

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Cooperatives became an essential part of nation building, as they not only strengthened bonds of community among co-ethnics but also fulfilled Listian visions of pushing ‘backwards’ nations along the winding road to material progress. All this could be done without relying on outside sources of finance, including those provided by vilified Jewish moneylenders.121 Moreover, profits of cooperatives could be used to invest in other national projects. These included land purchases and the financing of cultural venues. For example, some German credit institutes in Transylvania spent the majority of their income on German-language education and community-building projects.122 Czech cooperatives became training grounds for nationalist cadres gearing up for a career in Bohemian politics.123 Polish cooperatives in Germany financed electoral campaigns by Polish candidates.124 In all of these extracurricular activities, however, cooperators needed to ensure that they did not endanger the economic primacy of their mission. Reckless speculation on nationalist pet projects could endanger members’ assets. In areas that were very poor, or where too few conationals could be mobilised, cooperatives had to open their doors to outsiders to shore up the necessary capital.125 In this careful balancing act between isolationist purpose and expansionist rationality, cooperatives were emblematic of the ability of nineteenth-century economic nationalists to compromise. They recognised the adverse effect that complete ethnic isolation would have on their ability to finance projects that could improve their groups’ economic advancement in what were still relatively poor rural areas. This ethos allowed credit cooperatives to thrive, providing a reliable financial backbone to the nationalist movements that complemented boycott agitation and risky investments in land. The effects of the nationalist movements in East-Central Europe were considerable. In the three decades before the war, the economy of the AustroHungarian Empire splintered along national lines as interethnic trade decreased.126 In its stead, national Polish, Czech, Hungarian and Romanian economies emerged years before these states were created in their interwar borders by the Paris Peace Treaties. This appearance of the ‘border before the border’, in turn, should alter our perspective on the interwar period. The traditional view of economic nationalism focuses disproportionally on the protective behaviour of these new states in the 1920s and 1930s.127 There is no doubt, of course, that these interwar states erected high tariff walls to inhibit international trade. Yet much of this trade already flowed along national lines due to nineteenth-century efforts at nation-building, significantly reducing the impact of the new borders.128 There is also no doubt that the interwar states pursued highly nationalist economic policies in other realms, including monetary relations. Yet this too was the legacy of the prewar boycott and cooperative movements. They created enduring institutions and ideologies of ethnic exclusion and self-sufficiency that shaped the region’s economic outlook for

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decades to come.129 The fact that these movements were able to endure largely through grassroots efforts without state aid aptly demonstrates the enormous mobilising potential of economic nationalism in the age of globalisation.

4.4 Land, Looms and Liberty in India and Ireland Those who wished to emphasise the dangers of a recklessly globalising world economy in the last half of the nineteenth century often pointed to India and Ireland. Henry Carey almost ritually invoked the ‘ruin’ free trade and British rule had inflicted on these two countries. Ireland and India provided symbols of industrial decline, foreign domination and famishing poverty that served as a cautionary tale for Carey’s American audience.130 On this point, Carey was in agreement with Karl Marx, who saw Ireland and India as illustrative of colonies drawn into exploitative capitalist production relations by their imperial masters.131 Even in Westminster, British bureaucrats grouped both territories together as troublesome jurisdictions, stricken with internal confessional strife, economic backwardness and the seeds of sedition against British rule.132 Quite irrespective of their dissimilarities, these two countries became linked together in the imagination of foreign nationalists, socialists and British imperialists. None paid much attention to the roles that nationalists in India and Ireland imagined ‘their’ nations as playing in the world economy. Nationalists in India and Ireland linked the poverty and perceived backwardness of their homelands to British colonial rule. Economic grievances therefore played a large role in the development of their nationalist movements and their campaigns for independence. In both countries, intellectuals also took up the Listian idea of industry and independence being connected. In Ireland, non-importation movements had been demanding protection of domestic industries against British competition since the mid-eighteenth century (Section 2.2). These movements gradually became more radical and acquired a more ambitious agenda. Under the influence of Arthur Griffith (1871–1922) and his newly founded Sinn Féin party, nationalists focused on the construction of separate Irish institutions that would propel the country to political autonomy and industrialisation. Griffith based these ideas on his interpretation of Friedrich List’s National System.133 The growth of Indian economic nationalism was initially driven by a small group of intellectuals in the 1880s and 1890s, who deplored India’s economic relationship with Britain. They founded the Indian National Congress as a vehicle to express these grievances. Among them was Mahadev Govind Ranade (1842–1901), who drew on a variety of American and European thinkers, including List. Ranade imagined industrialisation as a broad-based modernisation effort that would cut through India’s entrenched social hierarchies and caste systems to transform the country into an exporting powerhouse.134

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However attractive the expansionist ideologies of Griffith and Ranade may have been to nationalist elites, they did not necessarily command broad support. This was a problem, because pressure on British authorities could only be exercised by mass movements and these often required nationalists to popularise and adapt their message. In Ireland, conflict over land had excited mass agitation during the Land War (1879–81) in reflection of the rural nature of Irish politics. Irish nationalists therefore needed to speak for farmers, not just for industry. Indian nationalism was likewise modified by popularisation. The Congress Party only started to attract a larger audience after the haphazard British partition of the eastern Indian province of Bengal in 1905 and more decisively in the interwar period under the guidance of Mohandas Gandhi (1869–1948). Gandhi focused the energies of the nationalist movement on self-sufficiency and the home production of goods (Swadeshi).135 Even Indian industrialists, who had a stake in the home market rather than in foreign trade, increasingly took an inward-looking stance. India’s trajectory after independence in 1947 was therefore much more isolationist than foreseen by India’s Listian economists. *

The chronologies of Indian and Irish economic nationalism were naturally quite different. Griffith and Sinn Féin followed the mobilisation of the preceding Land War, and therefore needed to take existing rural interests into account. Ranade’s ideas were modified by the subsequent mobilisation of the Swadeshi movement. Despite this difference in trajectories, the visions that Irish and Indian economic nationalists articulated at critical junctures share key similarities. This was partly due to bilateral Irish-Indian links. For example, supporters of Irish nationalism played leading parts in the deliberations of the Indian National Congress. Reversely, politicians such as Dadabhai Naoroji (1825–1917), the ‘Grand Old Man of India’, supported Irish Home Rule in the British parliament.136 Even more decisive were structural similarities between both countries that stemmed from the way they had been incorporated into the British Empire. Imperialism manifested itself in a land distribution often at odds with local customs. Anglo-Irish landlords could trace their economic and social position back to British land settlements in the seventeenth century. Bengal’s landed magnates, the Zamindars, similarly owned vast tracts of land by the grace of the British authorities. Moreover, India and Ireland had to abide by Britain’s free trade policies. Consequently, both had become predominantly agricultural economies exporting foodstuffs and raw materials to the British metropolis by the mid-nineteenth century. With their traditional textile industries outcompeted by highly mechanised British manufacturers, deindustrialisation seemed terminal. The few large industrial enterprises that remained were often associated with British interests. Linen and shipbuilding survived in Ireland’s Protestant and pro-British

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North. Railway construction proceeded at a fast pace in India, but this network was seen as serving the needs of British investors and exporters.137 Colonialism shaped minds as well as economies. The imperial connection exposed Irish and Indian nationalists to intellectual developments in London, a cosmopolitan market place for nationalist, socialist and liberal ideas from around the world.138 Particularly important was the influence of liberal economic thought, especially the writings of John Stuart Mill (1806–73). Mill was a classical economist of a less dogmatic bend than Ricardo and his followers had been. He provided a liberal defence of the infant industry argument, and advocated pro-tenant land reforms in Ireland. However, Mill was also an employee of the East India Company who defended ‘rational’ British imperialism on the grounds that it promoted economic progress and modernisation on the subcontinent. Mill thus gave Indian thinkers the yardstick and the economic vocabulary with which they could evaluate the welfare effects of British rule.139 Moreover, British unification of the subcontinent’s disparate territories through a centralised system of administration, a railway network and a single currency created the compact economic space called ‘India’ on which local nationalists could build.140 This cosmopolitan context set Indian and Irish thinkers apart from leaders in Central Europe, whose main connection with intellectual trends in economics was the German Historical School. Conversely, many Irish and Indian thinkers were well-informed about nationalist movements in continental Europe and often used their programmes to shape and refine their own positions. As such, intellectuals in India and Ireland saw themselves explicitly as participating in a global movement towards economic autonomy, and this proved to be their defining feature. M. G. Ranade, referred to as the ‘Fredrick List of India’ by contemporaries, was the most striking example of a cosmopolitan nationalist.141 His lecture Indian Political Economy delivered in 1892 at Poona provided the impetus for Indian efforts to craft a school of economics appropriate for the conditions of the subcontinent.142 Curiously, Ranade did not discuss Indian conditions in great detail in his lecture. What he did provide was an erudite analysis of the history of economic thought from Smith to Mill. He argued that this classical brand, especially in its Ricardian guise, was quickly becoming outmoded. Around the world, Ranade maintained, alternative visions of economics were developing: the French protectionists, Hamilton and the American School under Henry Carey, Adam Müller in Germany and of course Friedrich List, who ‘gave the fullest expression to this rebellion against the orthodox creed’.143 Even in Britain, Ranade explained, scholars such as Mill and the Irish institutionalist T. E. Cliffe Leslie (1825–82) were demonstrating how classical economics was being replaced by historicist methods that carefully tailored economic policy to distinct contexts.144

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This exercise in the history of thought was not just an academic parlour game. Ranade saw it as a double thrust against the intellectual foundations of British rule. For one, Ranade attempted to show that free trade was a minority position among economists worldwide: the science on which this policy rested was distinctly Anglo-centric, ‘English and insular’.145 As a policy, free trade was on the retreat globally, as even British colonies such as Australia were busy erecting barriers to foreign goods and workers.146 There was no need for India to stem itself against the tide of history and embrace unconditional integration into the world economy. Moreover, by discussing various intellectual traditions from around the world, Ranade wanted to demonstrate that India should develop its own patterns of thought as well.147 He stressed that this new Indian economics would be close to continental European models: ‘On the Continent of Europe, however, Indian Problems are fairly reproduced with Indian conditions of life and property, and the lessons to be derived from the study of Continental Economy have a more practical bearing than the maxims contained in the usual Text-books of English Political Economy.’148 Ranade eventually arrived at a formulation of economic progress that anticipated some of the insights of postwar development economists by almost a century (Section 6.3). His core idea was that Indian development was held back by non-market barriers. Individual profit motives, for instance, were stunted by collective bodies such as families and castes. Ranade also complained that capital and labour were rigid and immobile in India, because they obeyed the dictates of custom rather than the pressures of competition.149 He carefully evaluated German and Russian land reforms, as well as the operation of Hungarian banks in search of a solution. The lesson he drew from these precedents was that the state should overcome barriers to development by acting as a stimulating ‘National Organ’. Through state activism ‘[t]he Nation would soon start upon a new race of life with its powers invigorated and its energies awakened in a way no other single agency can accomplish’.150 Key items on the agenda were a public procurement system that would purchase from indigenous firms and the introduction of a national cooperative banking system that could fund industrial and agricultural development.151 Following List, Ranade held that industrial development was vital in turning back the debilitating ruralisation of Indian life. Although a powerful state was not in sight as long as colonial rule lasted, Ranade believed that a start could be made through the production of self-made Swadeshi goods. Eventually, a fully industrialised India would be able to trade with the rest of the world on equal terms. This would ‘ensure the permanent triumph of the modern spirit in this Ancient land’.152 Ranade hoped that the dirigiste state would manage India’s export-driven integration into the world economy, not unlike the policies adopted by contemporary Meiji planners in Japan (Section 4.5).

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Irish politicians also looked abroad for theoretical and tactical inspiration. Arthur Griffith modelled Sinn Féin’s strategy of establishing a separate Irish parliament in Dublin on the Hungarian national movement. The name Sinn Féin itself, translated from Irish as ‘We, Ourselves’, echoed the contemporary motto of Polish nationalists ‘sami sobie’: by Ourselves (Section 4.4). Separation was also the motto in economics.153 Presenting the new Sinn Féin Programme in 1905, Griffith spent most of his speech outlining the construction of Irish economic institutions. Not unlike Ranade, he advocated both the provision of funds to Irish enterprises and the imposition of import barriers.154 In the absence of a supportive central state, these barriers could be effected by local government bodies manned by Sinn Féin councillors. These would collect taxes, provide subsidies, adjudicate commercial disputes and procure Irish goods independently of the official ‘British’ economy.155 Similarly, Griffith proposed staffing the Harbour Boards with Irish nationalists who would then be able to levy informal dues on the inflow of foreign goods. Such action would awaken ‘the spirit of nationality’ among the Irish, who would quickly realise the benefits of investing with their brethren.156 In effect, Ireland would attain its own national banking system, its own stock exchange, its own merchant marine and of course, its own industry. Eventually, Griffith dreamed, Irish ships would export Irish goods across the seas.157 Griffith was not shy about the source of his ideas: I am in economics largely a follower of the man who thwarted England’s dream of the commercial conquest of the world and who made the mighty confederation before which England has fallen commercially and is now falling politically. His name is a famous one in the outside world, his works are the text-books of economic science in other countries . . . I refer to Friedrich List.158

Griffith’s almost obsessive quotations of List in Sinn Féin’s policy proposals were rooted in the obvious fact that his Ireland was very much unlike List’s Germany. Ireland’s poverty, the destruction of its textile industries ostensibly at English hands, the centuries of ‘Economic Oppression’, all this necessitated a bold vision of industrial progress that could obliterate the national shame of the present situation.159 The conception of poverty as a national, rather than a social, concern had motivated other Irish thinkers too. Isaac Butt (1813–79), a professor at Trinity College Dublin and an early proponent of Irish autonomy, had motivated his proposals for economic reform forty years earlier by the shame of witnessing Irish mass emigration after the Great Famine (1845– 52). Outmigration, Butt had written, starkly revealed the poverty and ‘ruin of the old nation’. The Irish were now forced to choose between leaving Ireland for the United States and living a destitute life under despotic English landlords. For Butt and other Irish reformers, only decisive action such as land reforms and tariffs would alleviate poverty and stop the nation being bled dry

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of its people.160 After cosmopolitanism, this link between poverty and imperial exploitation constitutes the second crucial feature of Irish and Indian nationalism. Theories of exploitation were most carefully explored by Indian economists, and in this they pre-empted much twentieth-century thinking on the topic. The most influential analyst was Dadabhai Naoroji, one of the first Asian members of the British House of Commons. Naoroji was a scholar with wideranging interests, covering the natural sciences and literature, but his burning passion was for economic statistics.161 From the voluminous statistical compendia published by the British authorities on Indian trade, land yields and food prices, Naoroji distilled two numbers: 1500 and 40. The first was the amount, in million pounds sterling, that had been ‘drained’ from India to Britain since the onset of colonisation.162 The second figure was the annual income, in shillings, of the average Indian at the time Naoroji was writing in 1876.163 As Naoroji stressed, this figure was far below the income required for subsistence.164 For generations of Indian nationalists, these two numbers would summarise the economic subjugation of the subcontinent and its resulting poverty. Dadabhai Naoroji’s statistical work on the drain of Indian wealth did not resurrect a long-buried mercantilist fixation on bullion outflows. It reflected a more sophisticated understanding of the global economy of the late nineteenth century.165 As Naoroji pointed out, India was actually running a surplus on the visible balance of trade, as it exported more commodities such as indigo and cotton than it imported British manufacturing goods in return. The difference was settled by an inflow of silver to India.166 This was no reason for celebration, according to Naoroji. The inflow of silver, to the extent that it reached the hands of Indian farmers, was mopped up by taxation. Given the paltry income of Indian peasants, tax burdens in colonial India were high compared to those in Britain.167 It was, however, not this tax burden itself that worried Naoroji, but the fact that tax revenues were spent by a foreign government. ‘Foreignness’ had direct and measurable economic implications for Naoroji. The British Raj purchased its supplies in Britain rather than in India. Its British civil servants were paid inflated wages, which they largely spent on goods and services in the metropolis. They also invested their considerable pensions in Britain. In sum, the fact that most Indian tax proceeds were invested abroad implied that government spending could not be used to satisfy ‘native wants’ and buy domestic produce.168 The railways built by the British were a marvellous thing, Naoroji agreed, but the materials needed for their construction came from abroad. Profits from Indian exports that accrued to British companies were also typically repatriated, rather than invested in India. In total, these financial remittances meant that India exhibited a deficit on its invisible trade balance. Naoroji visualised this as a ‘bleeding drain’, a depletion of India’s capital stock that was the cause for her poverty.

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Without adequate capital stock, no industry could form, and poverty would persist at 40 shillings a head.169 Despite his soft-spoken demeanour and profession of loyalty to London, Naoroji’s statistics undermined J. S. Mill’s economic justification for British rule. They seemed to show that the poverty of India was not the result of individual policy failings that could be rectified by a more enlightened British administration, as the British economist had claimed.170 Rather, poverty was the result of the inherent fact that the British government was not an Indian government, that it could, for that very reason, not tax and spend according to domestic Indian concerns. In British territories such as Australia or Canada, which had been granted self-government, matters were quite different, Naoroji argued. Under native rule, these countries were free to contract loans abroad for domestic investment, so that ‘the case would be one of a healthy natural business and the interest then remitted would have nothing to be deplored in it’.171 Naoroji’s position was therefore subtler than is sometimes supposed. He did not seek to abrogate external transactions, but thought that such transactions should only be carried out by sovereign states. The answer for India was therefore swaraj, self-rule. This credo, and its economic justification, became the goal of the Indian National Congress, over which Naoroji first presided in 1886.172 However, many Indian nationalists eventually interpreted Naoroji’s position as a principled opposition to international exchange. This was the result of the popularisation of nationalist ideas. In India and Ireland, themes of economic dependency and exploitation were not only developed at the abstract level, in intellectual treatises and conferences, but they found their way into popular agitation. Popular accounts of exploitation often focused on a few focal commodities that could be used to symbolise colonial economic relations. These included land in Ireland; in India they comprised salt and cloth. This popularisation of economic nationalism proved essential for Indian and Irish separatist movements to build the mass following that would lead them to independence. Yet these mass movements also developed a political dynamic of their own, which altered or conditioned the execution of the expansionist policy blueprints devised by thinkers such as Griffith, Ranade and Naoroji. This modification would decisively shape the economic policy of both Ireland and India after independence. Most pro-industry groups in southern Ireland, such as the non-importation movements of which Griffith’s plan was an heir, had their basis in urban constituencies, primarily Dublin. The majority of the Irish population, however, lived in rural regions, and these regions experienced the formation of a Catholic middle class, consisting of independent farmers, shopkeepers and publicans. At the same time, the majority of the rural Catholic population were poor dependent farmers, occupying small plots of land rented out by large landlords. Rural relations in Ireland were highly combustible, because

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ownership rights over land were ambivalent. English law generally recognised the landlord as sole proprietor, and saw farmers as mere tenants. This interpretation of property rights was supported by classical economists, who professed the right of the landlord to charge whatever rents the market would bear. Irish farmers regarded this as exploitation and often regarded themselves as owners of the land by right of continued occupancy and use. Irish nationalists bolstered their case by quoting old Celtic Brehon laws on customary land rights. Confessional tensions mattered too, because landlords were generally Protestant. Moreover, they were often descendants of English and Scottish soldiers and adventurers who had conquered Ireland in the seventeenth century. The conflict between landlords and tenants was therefore not only about ethno-religious cleavages and the incompatibility of English and Irish legal understandings, but also about the moral right of natives to land.173 The spark that lit the tinderbox was, as elsewhere in the world, the global fall in grain prices of the 1870s. The income of tenant farmers plummeted, while many landlords did not decrease rents, stoking fears of mass evictions and even famine.174 This provided an opening for the Irish nationalist Charles Stewart Parnell (1846–91), a gifted organiser and parliamentary tactician, to make inroads into rural constituencies. Land rights and excessive rents were economic issues that clearly touched upon the daily lives of ordinary people. Land was also connected to notions of nativity, nurture and community that excited nationalist agitators. For the Fenians, a radical and occasionally violent republican organisation, a new Irish state was to be built on an ancient Celtic past of communal land rights.175 Striking a pact with the Fenians, Parnell founded the Irish National Land League in 1879 to organise rural protest. Under the aegis of the League and its local bodies, tenants collectively withheld rents from their Anglo-Protestant landlords. Striking tenants were supported financially by the new Catholic middle classes and the priesthood, thus creating an ethnoconfessionally defined mass movement that cut across class boundaries. Those who did not cooperate with the League were socially and economically boycotted by the village community. Violence and assassinations were also used to intimidate boycott-breakers and recalcitrant landlords, although these tactics were never officially acknowledged by Parnell.176 The ‘Land Wars’ were contained after three years by the British government through a combination of legal concessions and targeted repression, but the rural movement they created persisted.177 A straightforward application of Griffith’s plan for industrialisation was therefore unrealistic even after independence had been achieved in 1922, because it ignored the essentially rural basis of Irish politics. Food exports to Britain remained important for the livelihood of Irish farmers and this created a powerful lobby for a continued close relationship with the former imperial metropolis. From the 1930s until at least the late 1950s, independent Irish governments did indeed protect

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industry and limit the foreign ownership of enterprises, in line with Griffith’s programme. However, governments also continued to be responsive to demands for rural investment.178 They therefore generally acknowledged the primacy of agriculture, and emphasised rural community building alongside Listian factories.179 The blueprints developed by Ranade and his collaborators in India were likewise modified in the process of mass mobilisation. When the British rulers attempted to partition the province of Bengal in 1905, nationalists protested against the decision by patronising homemade Swadeshi goods over British products. The boycotts quickly gained a wider following, encouraging nationalists to distil their ideas for their new audience. They translated the economic thought of Ranade and Naoroji into popular idiom, printing easily digestible summaries of economic ideas for mass consumption. This was met with considerable success. Street performers and popular artists composed poems and songs expounding nationalist economic slogans. In the process, concepts such as Naoroji’s drain theory were often shortened to calls for national selfsufficiency. These were loaded with Hindu religious language seeking the protection of Bharat Mata, the deified ‘Mother India’.180 The following song by the composer Rajanikanta Sen (1865–1910) offers a concise summary of the nationalist fusion of non-importation, drain theory and religious imagery popular at the time: We may be poor, we may be small, But we are a nation of seventy million; brothers, wake up. Defend your homes, protect your shops, Don’t let the grain from our barns be looted abroad. We will eat our own coarse grain and wear the rough, home-spun cloth, What do we care for lavender and imported trinkets. Foreigners drain away our Mother’s milk, Will we simply stand and watch? Don’t lose this opportunity, brothers, Come and congregate at the feet of the Mother.181

At the turn of the century, however, mass mobilisation did still have its limits, even within Bengal. Expensive Swadeshi goods often stretched the means of poor consumers, and Muslim-Hindu divisions in the countryside further hampered mobilisation. In fact, the use of Hindu imagery itself served to alienate Muslims and deepen confessional divides. It was Gandhi, having returned from his legal and social work in South Africa in 1915, who successfully broadened the base of the Swadeshi movement and made it the cornerstone of the Congress Party’s bid for Indian independence.182 Gandhi made the Swadeshi movement even more accessible by reformulating elite ideas to reflect the lives of the rural masses (thus mirroring a similar trend as in Ireland). By his own admission, Gandhi was a layman in economics,

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but that did not stop him from developing a coherent vision of an Indian community of village producers.183 Infusing economics with strong notions of morality, Gandhi emphasised cooperation and a duty to aid others through material sacrifice. Supporting the livelihood of a poor weaver by purchasing the product of their loom could be such a monetary sacrifice. Although the duty of material support existed in principle towards all human beings, morality dictated that the obligation weighted most heavily towards one’s conationals: ‘I cannot starve my neighbour and claim to serve my distant cousin in the North Pole. This is the basic principle of all religions, and we will find it is also of true and humane economics.’184 Hence, as long as poverty existed in India, ‘voluntary prohibitive tariffs’ as embodied in the Swadeshi movement were legitimate.185 Similarly distrustful of exports as of imports, Gandhi drew heavily on Naoroji’s drain theory, which he interpreted as showing that India’s outward orientation had caused the neglect of her own natives. He also agreed with Ranade’s assessment that India’s situation demanded Indian policy solutions.186 He was, however, extremely distrustful of mechanised industry, which he thought displaced workers and encouraged pauperisation. Instead, the betterment of the poor lay in self-sufficient village communities, cooperatively producing cloth with local labour and resources. Communal cloth spinning and weaving would also unite the nation and lift its spirits.187 Gandhi’s exaltation of textile production was also highly symbolic. His white homespun khadi cloth served as a powerful emblem of the Swadeshi movement. The cloth tapped into traditional cultural symbolism, where coarse white cloth connoted purity, sanctity and homeliness. The uniform simplicity of the cloth was also supposed to obviate sectarian and caste divisions, giving texture to a unified and disciplined national movement. Gandhi’s spinning wheel, emphasising creation and national production, became the flag of Congress, and khadi cloth became the fabric of the flag of independent India. Gandhi’s protests against the British salt taxes had a similar performative effect. By publicly manufacturing salt, he symbolically asserted Indian ownership over a daily commodity that was subject to British monopoly claims.188 In all these efforts, Gandhi strove to assert local control over key commodities. Gandhi’s evocation of the rural idyll was not always taken to heart by the rest of the Congress leadership. But they did realise that home production and mass boycotts remained a useful lever to exert pressure on the colonial government. Swadeshi was quickly expanded beyond cloth to encompass a broad array of goods. Congress started drawing up public lists of certified Swadeshi enterprises to distinguish home from foreign production. Reflecting the increasing nativist sentiment engendered by the Swadeshi campaigns, Congress determined that the criteria for a product being designated Swadeshi should not merely be the location of production, but also the ownership of the means of production. Only goods produced by Indian

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japan, russia & the ottoman empire: list’s bitter triumph 105 workers and produced with capital owned by Indians would therefore escape the boycott. Eventually, many Indian capitalists threw their lot in with the Congress Party, most notably in the Bombay Plan of 1944, where business leaders agreed to regulatory oversight from a future Congress government in return for protection against competition from foreign businesses.189 This support of Indian industrialists for protection was the second decisive factor, after the dynamics of Swadeshi mobilisation, that tilted the nationalist platform towards isolation. Indian industry had grown rapidly in the first decades of the twentieth century, largely because the World Wars had disrupted the import of competing manufacturing products. Gaining the political backing of this rising interest group was therefore crucial for nationalists, but it was not immediately clear that industrialists would support an isolationist programme. Some industrialists had an interest in continued protection, but others had export interests too. However, three factors worked against an outward focus of Indian enterprises. First, some industrialists complained that discriminatory practices by the British had reserved international trade for British import-export houses. These industrialists were therefore receptive to a nationalist programme focused on the home market. A second restriction on Indian businesses was that their networks tended to be more local, and their financial resources smaller, than that of British businesses. Indian entrepreneurs were therefore more reliant on local markets. Finally, British trade policy itself moved towards encouraging imperial trade at the expense of wider international trade during the interwar period, increasing pessimism about the viability of an export-focussed stance among Indian entrepreneurs (Section 5.2).190 Isolationism presented a departure from earlier forms of economic nationalism in India. Naoroji had been open to accessing foreign capital markets, while the goal of Ranade’s dirigiste state was a competitive export industry. Policymakers in independent India under Jawaharlal Nehru (1889–1964) retained the dirigiste state, but admixed it with stringent licensing, import restrictions and capital controls. As a result, India remained one of the most highly regulated and protectionist countries outside of the socialist bloc until 1991. And whilst the methods of planning and protection were inspired by socialist technocrats, their rationale was derived from the popularisation of nineteenth-century nationalism.191

4.5 Japan, Russia and the Ottoman Empire: List’s Bitter Triumph Listian thought had its most immediate impact in three old empires: Japan, Russia and the Ottoman polity. As opposed to their Indian and Irish counterparts, nationalists in these empires had retained control over a bureaucratic state apparatus that could be leveraged to implement economic policies. Two

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factors made policymakers in all three empires particularly responsive to Listian ideas. First, income levels between the rapidly industrialising West and the periphery of the world economy in eastern Europe and Asia had diverged dramatically by the second half of the nineteenth century. In 1860, on the eve of Russia’s Great Reforms and eight years prior to Japan’s Meiji Restoration, Western Europe and the United States accounted for close to 50 per cent of global manufacturing output. This proportion had doubled in only thirty years.192 The world encountered by would-be reformers in peripheral countries had therefore become rapidly more unequal than it had been during List’s time. This lent their attempts at catching up even greater urgency. Moreover, the success of the United States, Germany and France at joining the ranks of industrial powers seemed to vindicate the thinking of the nationalist economists associated with this rise, as well as their policies.193 Second, policymakers in all three empires had been made painfully aware of Western political dominance by 1860. The Ottoman Empire had, in effect, been forced to abstain from using commercial policy in exchange for British military assistance in 1838. The ensuing settlements with Britain and other European powers committed the Ottoman Porte to a low tariff rate, unhindered market access for foreign traders, and diplomatic immunity for Westerners on Ottoman soil.194 In Japan, US gunboats had forced the moribund Tokugawa shogunate to accept the opening of its ports to trade, the extraterritoriality of foreign traders and a tariff cap in the 1858 Harris Treaty.195 Russia’s defeat in the Crimean War (1853–56) by a British and French-led alliance drove home the military superiority of an enemy commanding modern technology and means of communication. While the ensuing peace settlement left Russia’s sovereignty largely intact and its government unencumbered by the restrictions placed on Japanese and Ottoman commercial policy, the power disparity had been made clear.196 For all three governments, the widening gap in economic production thus suggested equally gaping differences in political and military power that, if they were to be addressed, necessitated new and bold measures.197 The salience of economic nationalism was further accentuated by the fact that Western powers had used their military means to push through commercial concessions. Free trade seemed to be, just as List had written, the weapon of the strong against the weak. In all three empires, governments therefore looked to protect domestic markets with the tools they still had at their disposal. At the same time, the commitment to rapidly expand production made nationalists in Japan, Russia and the Ottoman Empire generally willing to accept foreign capital and to integrate themselves with global goods markets through exports. As predicted by the Nationalist Dilemma, they attempted to moderate this international exposure by regulating foreign capital, often through state banks. Expansionist Listian ideas were also frequently challenged

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japan, russia & the ottoman empire: list’s bitter triumph 107 by homegrown isolationist variants, which sometimes thwarted the implementation of an outward-looking policy. Policymakers tried to diffuse these challenges by emphasising national unity. However, these programmes did little to soften ethnic divisions, where they existed. This had disastrous consequences in the Ottoman Empire, were ethnic divisions corresponded to economic inequalities.

4.5.1 Protecting Domestic Industries The degree to which protectionist ideas were imported from abroad roughly corresponded to the degree by which domestic markets were penetrated by foreign capital and merchandise. The effect was starkest in the Ottoman Empire, whose manufacturing sector was, on the whole, not able to withstand competitive pressures from Western exporters.198 Initially, liberal Ottoman reformers of the Tanzimat era (1839–76) were at pains to stress that this was not a problem: the comparative advantage of the Ottoman economy lay in agriculture, especially grains. However, as Ottoman grain production was disrupted by the global fall in grain prices of the 1870s, free traders were put on the defensive.199 They were challenged by the rise of thinkers associated with the nationalist Young Ottoman movement. In their economic writings, Young Ottomans such as Menâpirzade Mustafa Nuri Bey (1844–1906) stressed how liberal trade agreements with western powers had destroyed traditional manufacturing workshops. They advocated protectionist solutions to build up the mechanised industry they increasingly saw as the hallmark of a modern state.200 Nuri Bey’s analysis was based on a detailed study of western and Ottoman economic literature, but persecution of the movement by the autocratic sultanate prevented Young Ottoman writings from reaching a broad audience. This wider impact was eventually accomplished by the journalist and writer Ahmed Midhat Efendi (1844–1912), one of the most widely read authors of his time. Although lacking the sophistication of Nuri Bey, Midhat proved to be an influential populariser of economic ideas, even attaining the patronage of Sultan Abdülhamid II himself.201 Midhat’s work betrays close parallels to Friedrich List. He criticised the alleged universalism of classical economic theory as inappropriate for the specific circumstances of the Ottoman Empire, which instead called for investments in education and, predictably, an assertive tariff policy. Like List, he lionised those who had successfully stood up to English hegemony as an inspiration for a ‘patriotic’ Ottoman policy. Midhat’s writing also helped to construct an integrative economic nationalism based on economic cooperation and unity among (Muslim) Ottomans.202 These ideas helped to pave the way for the ‘National Economy’ (Milli İktisat) programme implemented by the more radical Young Turk regime after 1908. Strongly inspired by Friedrich List as well as ethno-centric nationalism, Young

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Turk intellectuals such as Ziya Gökalp (1876–1924) stressed the abrogation of the hated commercial treaties, direct state support for industries and the creation of an ethnically Turkish entrepreneurial class.203 Under Gökalp’s principle of ‘solidarism’, which he deemed to be ‘the system most compatible with Turkish culture’, a Turkish entrepreneur would ‘preserve and increase [his] wealth for use in the interest of the whole’. The interest of the whole, naturally, lay in industry. Reflecting the importance of American and especially German influence in the Empire from the turn of the century onward, Gökalp stressed that ‘National economic theorists will be our guide in this matter. John Rae in America and Friedrich List in Germany proved that the school of economics founded in England [was] merely a system of national economy that was peculiar to England.’204 Instead, Gökalp believed that Rae and List had founded the success of ‘their’ countries on industry. Gökalp’s ideas outlasted the fall of the Ottoman Empire in 1923 and he became the intellectual father of Turkish nationalism in Kemal Atatürk’s new Republic of Turkey.205 Meanwhile, the economic ideas of the Young Turks, national selfsufficiency and state-fostered industry, decisively shaped the institutions of the new Kemalist state.206 As in the Ottoman Empire, the forced opening of Japan to international trade under the Harris Treaty in 1858 triggered hostile reactions. In Japan, these reactions were immediate and at first quite isolationist and openly xenophobic.207 Politically, the humiliation of this ‘unequal treaty’ demonstrated the impotence of the Tokugawa shogun as the defender of Japan. Economically, the sudden opening of ports and the outflow of bullion to Western powers triggered a debasement of the coinage that led to galloping inflation. This undermined the economic position of the samurai, who lived on fixed stipends. Economically déclassé samurai started propagating centralised Imperial rule as an alternative to the Tokugawa regime under the slogan ‘Revere the Emperor, expel the barbarians’. This they meant quite literally: foreign traders admitted into the formerly isolated country were met with a wave of violent attacks, carried out by bands of disaffected warriors. Caught between xenophobic samurai on the one hand and militarily superior Western powers demanding retribution for the killing of their citizens on the other, the shogunate collapsed.208 It was nominally replaced in 1868 with rule by the Meiji Emperor, but de facto by an oligarchy of samurai from south-western Japan. The Meiji ‘Restoration’ was, in many ways, a top-down nationalist revolution not unlike Bismarck’s, a parallel readily acknowledged by the Meiji reformers themselves.209 The new administration fostered political centralisation by abolishing the feudal domains, encouraged the creation of an educated mass society unencumbered by rigid class distinctions, and promoted economic unification through railway building. The ultimate aim was to prepare Japan for competition with the West on equal terms, and erase the humiliation of the unequal treaties. In Meiji parlance, the motto was: ‘Rich

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japan, russia & the ottoman empire: list’s bitter triumph 109 Nation, Strong Army’. The supreme goal was therefore wealth and power, not unlike that of later Chinese nationalists (Section 5.5). While during the fall of the Tokugawa shogunate, nativists might have clamoured to ‘expel the barbarians’ and return Japan to splendid isolation, it was clear to the majority of Meiji statesmen that this isolation from Western technology was at the root of Japan’s weakness. National strength required an engagement with the world economy, even if this was to be a selective one. Once the need for technology imports was admitted, and in the absence of import duties, balancing the trade accounts required an export push.210 Expansionist nationalism became therefore official state policy in Japan. This does not mean that Meiji rulers imposed a uniform ideology on their population. Rather, economic nationalism during the Meiji era meant that the basic principle of the nation as the overarching frame of reference for economic action was widely shared in Meiji society. In the words of Prime Minister Itō Hirobumi (1841–1909), the ultimate goal of any commercial transaction should be the ‘honour and wealth’ of the Japanese nation.211 Beyond this core tenet, there was significant divergence between intellectual leaders as to whether interaction among Japanese should primarily be based on competition or on cooperation. Whereas traditionally minded thinkers emphasised Confucian values of loyalty, filial piety and cooperation, liberal thinkers such as Fukuzawa Yukichi (1835–1901), probably the most influential writer of his era, stressed individual competition.212 However, while Fukuzawa held that ‘all varieties of profession are open to free competition’, he explained that ‘the competition is not for the sake of fighting against each other. On the contrary, the object of fighting, if not with one’s sword but with one’s intellect, is to confront foreigners. If we win in this intellectual fighting, then we shall improve the station of our country. If we lose, then we shall see it degraded’.213 The objective of individual freedom was not individual betterment, but national economic growth and modernisation.214 Only competition amongst themselves would make the Japanese strong enough to compete with the West in ‘peacetime economic warfare’.215 Intellectual pluralism, coupled with an acceptance of the primacy of the nation, made Japanese intellectuals receptive to the teachings of foreign nationalists. These imports helped to determine the form, though not the prevalence, of Japanese economic nationalism. In the 1870s and 1880s, the works of Henry Carey and his quest for a harmonious economy under tariff protection were the most influential. The quest to regain tariff autonomy thus became one of the principal goals of Japanese foreign policy.216 As in the Ottoman Empire and Russia, List and the thought of the German social reformers became important from the late 1880s onwards. The National System received its first translation into Japanese in 1889, by Oshima Sadamasu (1845–1906), with forewords from leading Meiji policymakers.217 Oshima accompanied his translation two years later with a separate

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monograph (On the Present Situation) which applied List’s thinking to Japanese policy problems. Similar to his counterparts in Russia and the Ottoman polity, he stressed the need for Japan as a late industrialising nation to shield native industry with tariff walls.218 From the late 1890s, Meiji modernisers also adopted the German emphasis on national unification through social reform, which inspired an approach some contemporary Japanese economists called ‘national socialism’.219 In Russia, Listian economic nationalism did not strike deep roots among the population more broadly. However, it did decisively influence a number of key political figures, most importantly Sergei Iulievich Witte (1849–1915). Witte served as Minister of Finance between 1892 and 1903, and bore general responsibility for the Empire’s economic policy for most of the 1890s. Quite possibly no government has ever modelled its policy so directly and explicitly on a reading of List’s National System as the Russian government did during this period.220 Part of a small circle of ‘westernised’ civil servants, Witte was convinced that deeper economic and social reforms were needed to maintain the status of the Russian Empire as a predominant power in Eurasia.221 The challenges were formidable. Despite the formal liberation of the serfs in the 1860s, many peasants continued to live in poor rural communes and urban demand for manufactured goods was weak. A lack of infrastructure meant markets in the Empire remained disintegrated and a weak commercial banking system implied that domestic capital for investment was scarce.222 Without radical action, Russia seemed destined to suffer the fate of the Ottoman Empire, once derided by the Tsar as the ‘sick man of Europe’. Witte outlined his solution in an 1889 pamphlet The National Economy and Friedrich List, which was a translated and annotated synopsis of List’s National System.223 ‘We Russians’, Witte complained, ‘followed in the field of political economy the course of the West’. This had led to the reign of ‘baseless cosmopolitanism’, but Witte believed that the National System contained the antidote.224 The Russian statesman was an erudite, though highly selective reader of List, condensing the National System down to sixty pages and eschewing most of List’s detailed discussion on tariffs. Instead, Witte concentrates on the role of education, market integration and the primacy of national over individual decision-making. On the final pages, he focuses on List’s view of finance (‘Weapons of Circulation’). What had been mostly an afterthought in List’s original becomes central for Witte’s interpretation, who arrives at a sequence of policy recommendations that clearly prefigure his own policy of industrialisation three years later. First, Witte establishes that a country ‘poor in capital and manufactures’ will become indebted to foreign countries through imports. However, a capital-rich country can use its superior credit institutions to lower the price of its manufacturing goods in foreign markets and hence export abroad.225 Witte therefore envisaged an expansion of credit to domestic enterprises, who would then be able to export to poorer countries

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japan, russia & the ottoman empire: list’s bitter triumph 111 (Central and East Asia, in Witte’s implementation). Next, he points out that such a strong credit system cannot exist if the currency is not tied to gold, or if capital is flowing out due to persistent trade deficits. Both processes would endanger financial stability. It is for that reason that the ruble should be backed by gold and that tariffs are needed.226 Over this system, Witte hoped, the Tsarist autocracy would stand watch as an impartial national decision-maker, educating its people to be productive citizens and building railways to further the ‘association of productive forces’ between the far reaches of the Empire.227 Witte won his first battle with the passage of a protectionist tariff bill in 1891. The tariff bill was largely due to the groundwork of his ally Dmitri Mendeleev (1834–1907), who was not only Russia’s foremost chemical scientist, but also one more convert to List’s cause.228 In his economic writings, Mendeleev stayed closer to Listian tariff orthodoxy than Witte, focusing on the need to protect infant industries at intermediate stages of development, although he agreed with Witte that credit expansion should play a role too.229 In addition, Mendeleev worked as a tireless lobbyist for protection, hoping to persuade the Tsar of his vision of Russia as an industrial civilisation, where science and education would be geared towards the material progress of all.230 While Mendeleev’s protectionism fell on fertile ground, the larger vision of industrial progress, however, was less amenable to Russia’s landowning nobility.

4.5.2 Managing Foreign Capital The Ottoman Empire, Japan and Russia therefore witnessed debates between free traders and Listian defenders of industry that paralleled those that took place in Western Europe and the United States at the same time. In other areas of economic policy, however, thinkers and politicians in all three polities went beyond List and sought their own ways of adaptation to, and integration with, the world economy. This is most apparent in the transfer of foreign capital and technology. In most peripheral economies before World War I, there existed a basic consensus that economic development required the import of foreign capital, technology and skilled workers.231 Nonetheless, an excessive reliance on these inflows could leave sensitive domestic assets, such as land and factories, in foreign hands. The resulting dilemma was of course the familiar dilemma between expansionist and isolationist motives. Economic nationalists in Japan, Russia and the Ottoman Empire sought to balance these conflicting objectives by attracting foreign capital and skills, while devising new ways to minimise their impact on domestic ownership structures. Like many of his colleagues in late industrialising countries, Witte was acutely aware of the need to tap foreign capital to modernise Russia’s existing manufacturing sector. He did this in two ways: foreign direct investment and sovereign bond issues. Foreign direct investment, often involving the relocation of foreign entrepreneurs and technical specialists to Russia, had a long

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tradition. In the 1840s, British capital had modernised the country’s cotton mills. Welsh pioneers had in the 1870s almost single-handedly founded and built present-day Donetsk, which was to become the primary centre of modern metallurgy in the Empire.232 While evidently economically successful, such ventures were criticised harshly by nationalist workers, intellectuals and ethnic-Russian industrialists who identified foreign capitalists with exploitation, dependency and un-Russian management practices.233 In Donetsk as elsewhere, rhetoric often spilled over into radical action when foreign plants were destroyed and managers assassinated, especially during the upheavals of the failed 1905 Revolution. ‘Their nationalism has been overexcited’, warned a French banker, ‘in such conditions one cannot even dream of directing Russian workers except with their own countrymen’.234 Sometimes agitators drew on socialist in addition to nationalist thought, although in practice anti-capitalist, antisemitic and xenophobic sentiments often overlapped. Germans and Jews were frequent targets. They constituted a commercially active minority in the western parts of the Empire and were habitually associated with dark plots seeking to cement foreign economic dominance.235 Foreign investment was therefore a fraught strategy. Witte’s second method of accessing capital was to place government bonds abroad. A prerequisite for the successful sale of Russian bonds in international markets was adherence to the gold standard, which Witte achieved in 1897. The proceeds of bond sales could then be funnelled by the Finance Ministry through the Imperial State Bank to Russian enterprises.236 Building up a strong domestic credit system was a cornerstone of Witte’s 1889 Listian policy manifesto and he pursued this option vigorously.237 The branch network of the State Bank was expanded to cover the entire Empire and branches were allotted funds to support local industries directly.238 While many funds were disbursed as low-interest loans, the repayment conditions were often so pliable that they were in effect subsidies. As Witte had written in his manifesto, the objective of state aid was to allow Russian manufacturers to undercut the prices of their foreign competitors.239 In doing so, Witte’s credit policy provided a way for the Russian government to industrialise with foreign bond capital, without acceding to foreign asset ownership. State credit also allowed Witte to push cheap Russian manufactures into Persian and Chinese markets, faithfully keeping with the Listian hierarchy of exchange between countries at different stages of development. In trading with the industrially advanced West, Witte could only fall back on grain exports to realise an export surplus. Witte’s focus on the maintenance of a trade surplus, also much evident in his 1889 manifesto, was needed to generate the foreign exchange that could back up capital imports.240 And here lay the one weakness of Witte’s system in the eyes of many nationalist critics, who could still brand Witte a ‘traitor’ for potentially giving lenders access to Russian assets if export receipts failed. The following

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japan, russia & the ottoman empire: list’s bitter triumph 113 attack by Vladimir Lenin illustrates well how nationalist and socialist rhetoric could be combined to produce an acrid critique of Listian economics in Russia: In fact, only one European country, Turkey, has ever used government property as collateral for state loans. And this naturally allowed foreign creditors to take control of the property that was used to guarantee the repayment of the borrowed money. The economy of ‘Russia, the great power’, under the control of agents of Rothschild and Bleichröder: such is the brilliant vista that you unveil for us, Mr Witte!241

The Japanese government was similarly concerned about the potential influence of foreign investors and strove to limit its foreign borrowing to times of war, relying instead on domestic capital accumulation. This did not reflect efficiency considerations, as the immediate burden of industrial finance now fell directly on the hard-pressed peasantry in the form of taxes. Instead, it reflected a conscious decision to attain national self-sufficiency in finance.242 Eventually, however, the twin capital needs of industry and army proved too large to be satisfied from domestic sources. Japan joined the gold standard in the same year as Russia (1897) to facilitate capital imports, and created a similar institution to handle foreign capital: The Industrial Bank of Japan. As a government-guaranteed bank, it solicited credit on international markets, which it then invested in the modernisation of privately owned Japanese industry. Its role was to act as a gatekeeper insulating Japanese firms from foreign acquisition, for ‘if foreign capital is allowed to flow in freely without passing through a central organ, foreigners will select Japanese enterprises in which they want to invest and will eventually take over the enterprises’.243 This financial protectionism was flanked by various prohibitions on the purchase of Japanese lands and mines by foreigners, as well as restrictions on foreign residency and naturalisation.244 Yet the Industrial Bank of Japan could not solve a remaining roadblock to industrial growth: the lack of technology. Here, once again, the Japanese government sought to balance the need for outside assistance with the objective of economic independence.245 This was done in two ways. First, the government acted as gatekeeper between domestic firms and the outside world by directly acquiring blueprints and prototypes from abroad, developing them in government laboratories, and distributing the results to Japanese businesses.246 Second, the government cooperated with large conglomerate firms, the zaibatsu, which sometimes formed joint ventures with foreign firms. These joint ventures eased access to Western technology, while leaving asset ownership in Japanese hands. Export earnings from these large conglomerates could be ploughed back into acquiring foreign technology.247 As such, the Meiji government attempted integration into the world economy on closely watched terms. The management of foreign capital and ownership proved to be most difficult for Ottoman policymakers. The Ottoman Porte had borrowed heavily on

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international markets since mid-century, but a lethal double crunch of rising interest rates and falling export prices had increased real debt burdens and forced the Porte into default in 1876.248 The governments of creditor countries reacted by placing Ottoman state finances under the oversight of an international body. The mechanism, with no attempt at euphemism called International Financial Control, allowed creditors’ representatives to collect taxes within the Empire and transfer the receipts to (mostly foreign) creditors. This system attracted great hostility on the part of Ottoman nationalists as a symbol of European economic domination.249 However, the system also guaranteed continued access to international credit markets. The Ottoman government therefore chose to cooperate with the oversight body, on the understanding that the body’s local executives would be Ottoman subjects and not foreigners. Rather than facing the risk of hostility from the local population, the international creditors agreed.250 Yet such pragmatism, although it allowed the Ottoman government to retain some local control, could not negate the fact that foreign investors maintained ownership over many assets viewed as strategically important. For example, the Imperial Ottoman Bank, which solicited foreign investments into the Empire, was essentially a British-French joint venture.251 This meant that the strategy employed in Japan and Russia of using the state bank to sever the link between foreign capital and foreign ownership was not available to the Ottomans. Nationalists blamed the strong position of foreign investors on the privileges of extraterritoriality, which removed them from the jurisdiction of the Ottoman state. Publicists such as Ahmed Midhat polemicised that these privileges had turned potentially benign investment into robbery. Foreigners, he wrote ‘were European tramps when they first came to Istanbul; today they are millionaires. Did they bring money from abroad? No, they found it here and stole it’.252 Turning this smouldering popular resentment into open action restricting foreign ownership, however, was a different matter given the weakness of the Ottoman state.253 Action disrupting foreign ownership was undertaken in a decentralised fashion, sometimes unofficially by recalcitrant local notables, but more often by Young Turk activists, who could capitalise upon local grievances created by foreign investment. For example, foreign modernisation of Ottoman port facilities and the accompanying mechanisation threatened established manual dock workers with unemployment. Under the aegis of the Young Turks, discontented dock workers were turned into an organised political movement that could be used to disrupt the operations of foreign investors and traders through strikes, sabotages and boycotts.254

4.5.3 Indigenising Nationalist Thought Under the circumstances of such mounting xenophobia in the Ottoman Empire, it may seem odd that ultranationalist Young Turks such as Gökalp, could advocate the adoption of ‘John Rae in America and Friedrich List in

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japan, russia & the ottoman empire: list’s bitter triumph 115 Germany’ as the standard bearers of economic nationalism. However, nationalists in the Ottoman Empire, as in Japan and Russia, never accepted Listian ideas wholesale. The transfer of these ideas always entailed a search for indigenous intellectual roots to which such an ideology could be tethered. At times, the quest for such ‘indigenous’ traditions of thought could give rise to alternative visions of national economic community that challenged the predominance of imported Listian variants. Within the Ottoman Empire, Islamic thought presented itself as an alternative source on which economic thinkers could draw. Islamic theology and law had since their inception made prescriptions on the proper conduct of commercial affairs, especially pertaining to the operation of credit, taxation and property.255 Moreover, the Ottoman Sultan was also the Islamic Caliph and Islam was a potentially formidable popular mobiliser, so any imported ideology had to adapt to this tradition. Ottoman economic nationalists were therefore at pains to stress that their thought was in accordance with the Quran, the Hadith and the moral precepts derived from them.256 Some writers, such as Nuri Bey and Ahmed Midhat, went further, arguing that economic nationalism and Islamic morality were not only compatible, but mutually reinforcing. For Nuri Bey, a Listian critique against the ‘individualism’ and ‘materialism’ of classical economics could be strengthened by an appeal to the early Caliphs and Muslim scholars. These authorities had prescribed that the social use of wealth stood above individual egotism.257 Midhat, in similar fashion, envisaged an economic community populated not by Adam Smith’s shallow homo economicus, but by a homo ottomanicus, who would be industrious, cooperative and moral. These were traits Midhat had derived from a study of Islamic texts.258 For Ottoman thinkers, therefore, protection against foreign competition was also the protection of an Islamic moral community against excessive individualism. This fusion of Islamic and economic thinking could potentially enlarge the remit of Midhat’s community beyond Ottoman boundaries to the Islamic world at large. Reversely, it could also be used to exclude the Empire’s large Christian populations from participation in that community.259 This division stymied the development of an integrative Ottoman economic nationalism, while galvanising that of a narrower MuslimTurkish community. It was in Russia where imported Listian thought encountered the most resistance (outside of the small and influential circle of technocrats led by Witte and Mendeleev). This does not mean that economic nationalism as a whole was rejected in Russia.260 The limited reach of the Listian vision was due to competition from an isolationist strand of thought as propagated by Slavophile intellectuals. Writers in the Slavophile tradition searched for an ‘authentic’ and indigenous representation of Russian economic life. This they found in the mir, the peasant commune, and in the kustar, the traditional workshop. Similar to Adam Müller and the German Romantics, with whom

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they shared an abhorrence of modern industry, the Slavophile elevation of ‘tradition’ was loaded with nationalist imagery.261 Such thinking was also adopted, with a more socialist slant, by the narodniki.262 Slavophiles and narodniki believed that Russians were imbued with the spirit of Orthodox Christianity or native communalism, making Russian peasants and workers uniquely predisposed to communal forms of work rather than Western-style competition. Capitalism, therefore, was as foreign to Russia as Jewish moneylenders, French bankers or German engineers. Only Russian landowners and manufacturers could tend to the needs of Russian peasants and workers through traditional paternalistic benevolence.263 Unsurprisingly, Slavophiles and even narodniki found adherents not only among the masses for whom they claimed to speak, but also among conservative landowners and manufacturers. For landowners, Slavophile arguments sanctified the status quo, for manufacturers, they could support calls to safeguard Russia’s unique economic community with tariffs.264 Slavophile nationalism also tapped into an underlying discontent among some Russians with the presence of foreign and ethnic-minority entrepreneurs. This ethnically loaded economic discontent shared similarities with the Ottoman Empire.265 However, where Ottoman thinkers saw List as an antidote to English and French economic penetration, the Russian intelligentsia branded the German List as a representative of Western industrialism in toto and advocated a return to native roots. Listian thought in Russia remained associated with Witte’s more open stance towards integration into the world economy. This latter characteristic made it similar to the version espoused in Japan. Despite similarities in content, expansionist thought in Japan was not as hotly contested as it was in Russia. After the military defeat of the Satsuma Rebellion in 1877, whose samurai leaders harboured rural and feudal social ideals, the broad consensus was in favour of industrial growth.266 This consensus arose in part because nationalist thinkers in Meiji Japan could draw on indigenous traditions of thought to complement imported ideas. This ability to imagine continuity with past practises gave modern economic nationalism its wide currency in Japan. Two traditions are of particular importance. First, there had been a tradition of mercantilism in many of the feudal domains constituting Tokugawa Japan. Autonomous domain governments had engaged in economic state building on a miniature scale, issuing their own currencies and monopolising the production of important ‘export’ goods. Gradually, these practises gave rise to the idea of kokueki, the management of economic affairs for the ‘prosperity of the country’. Meiji policymakers drew heavily on this concept.267 Second, such material justifications for economic management could be anchored in historical narratives of a Japanese national essence (Kokutai), that emphasised the divinity of the Imperial line and the ‘purity’ of the Japanese people. These were derived from the teachings of scholars in ‘national studies’, a nativist movement originating in the late

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japan, russia & the ottoman empire: list’s bitter triumph 117 Tokugawa period. Although these nativists had, during Tokugawa times, developed romantic visions of self-sufficient rural communities like their Slavophile counterparts in Russia, they had become a more exclusively literary and philosophical movement by the Meiji era.268 As such they could be marshalled to provide a description of the spiritual essence of the nation, while leaving the methods of its material realisation to the bureaucrats managing economic affairs. Unlike the Slavophile movement, Japanese nativists did not offer a potent Romantic challenge to industrial development.269

4.5.4 National Unity and Ethnic Fragmentation The possibility of contestation from rival discourses meant that Listian nationalists in Japan, Russia and the Ottoman Empire had to emphasise the unifying potential of their creed. To this end, policy reached out not just to industrialists, but also to farmers and workers. The quest for national unification through social harmony was heightened by the perception that industrialisation, while indispensable for national power, would also engender class antagonisms that could potentially dissolve national bonds of cooperation. For thinkers in all three empires, the social policy of Bismarck and the thinking of the German social reformers became a lodestar in their reform efforts.270 Policymakers of the late Meiji era were conscious of the challenge to their regime arising from socialism, or more generally, from workers and farmers displaced by industrial development.271 One counterstrategy which gained traction after the turn of the century was to strengthen the cohesiveness of farming communities. In this vein, cabinet minister Hirata Tosuke (1849– 1925) promoted rural investment and local associations, which he believed could strengthen ‘communities working on behalf of the nation’. Hirata had studied the operation of credit cooperatives in Germany and was influenced by Adolph Wagner (Section 4.2). For Japanese policymakers, this did not imply a return to rural isolation, only a softening of the social cost of industrialisation, because expansionist views remained paramount.272 One leading expansionist thinker was Kanai Noburu (1865–1933), who had studied in Germany with prominent figures of the Historical School, including Schmoller. He readily adopted German social policy and factory legislation to stymie the socialist threat. Like Schmoller, Kanai found that only social peace at home could provide a suitable basis for territorial enlargement abroad. The latter was his true aim, and he was a militant voice urging war with Russia over competing imperialist claims in Korea. As a skilled networker and leading educator of Japan’s bureaucratic elite, Kanai’s views on Japanese territorial expansion proved to be influential into the 1930s. As in Imperial Germany, such arguments drew on the belief that colonies would ease access to raw materials and provide a captive market for Japanese industry. Moreover, many economists believed that armaments would stimulate the demand for domestic industry.

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The resulting Japanese imperial expansion would play a leading role in the development of a reactive Chinese economic nationalism (Section 5.5).273 The stark cleavages between the Russian Empire’s many ethnicities, confessions and social classes provided formidable obstacles to Japanese-style integrative nationalism. This did not stop economic nationalists from dreaming of a unitary national community. Witte had started his career in the 1880s as a bureaucrat administering the Empire’s railway system, and like List, he became obsessed with the unifying potential of railways in a vast empire.274 Witte also saw Tsarist autocracy as a force for integration standing above petty politicking.275 Creating a national community, of course, required more than symbolism, and Russian economic nationalists of all stripes placed great hope in associations and cooperatives to create bonds of fellowship in the countryside, often following German social thinking.276 Yet the repressive institutions of Tsarist autocracy, always distrustful of bottom-up initiative, stymied many of these initiatives.277 While state control of this kind did prevent minority nationalisms from organising economically as they had done in central Europe, it also inhibited the formation of civil society that could have led to a broad-based all-Russian (Rossiysky) nationalist movement.278 During World War I and the ensuing Civil War, the empire would dissolve into its many factions, social classes and nationalities. Nonetheless, when constructing a new economic system on its ruins, Lenin could look both to Listian traditions promoting industrial development, as well as to those of the narodniki nurturing inward-looking approaches.279 In the Ottoman Empire, reformers had long talked about the value of imperial unity, and this had been one of the key ingredients into Ahmed Midhat’s cooperative homo ottomanicus. Nonetheless, Midhat himself repeatedly blamed the Empire’s Christian subjects for foreign economic domination, calling the integrative potential of his Ottoman project into question.280 With the benefit of hindsight, it is therefore easy to resign Ottomanism to the same dust heap of history as Witte’s dreams for a unitary Russian Empire. Yet Ottoman economic nationalism did have some mobilising potential. As late as the 1890s, both Christian and Muslim newspapers in Arab Syria would still regularly exhort their readers to patriotically purchase the Ottoman production of the homeland (‘Istanbul, Salonika, Damascus’) to resist European economic penetration.281 The increasing economic differentiation between Christian and Muslim Ottomans was, however, a powerful factor working against a broader Ottoman nationalism. Christians enjoyed better access to legal institutions, such as Western commercial courts, while Muslims used Islamic courts that inhibited the build-up of capital stock. Christians and Jews often placed themselves under the protection of Western consulates, being granted diplomatic immunity as well as trading privileges.282 On the whole, non-Muslim Ottomans were therefore in a better position to take advantage of the rapid

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japan, russia & the ottoman empire: list’s bitter triumph 119 integration of the Ottoman Empire into the world economy. In western Anatolia, Greek merchants were increasingly buying up lands from Turkish peasants, leading to fears of displacement not unlike those voiced in Central Europe at the same time.283 The influence of Armenian entrepreneurs was preponderant in insurance, banking and many manufacturing sectors. By the time of the 1915 industrial census, about 80 per cent of all private firms were owned by non-Muslim individuals, despite only making up 20 per cent of the population.284 As Christian businesses were, in the popular mind, often associated with western consular backing and the economic penetration of the Empire from the outside, it was easy to brand Christians as economic ‘foreigners’. Fighting against predominantly Christian adversaries in the Balkan Wars (1912–13) and World War I, also heightened paranoia that these economically affluent Christian minorities would act as a fifth column for an outside enemy.285 Indeed, it was during the Balkan Wars that many thinkers of the ‘National Economy’ School started espousing a more radical Turkic nationalism. For Ziya Gökalp and his Listian followers, only ethnically Turkish ‘national merchants’ could be relied upon to make the patriotic investments necessary to propel the country into the industrial age.286 After 1908, the creation of such an ‘indigenous’ bourgeoisie became an integral part of the economic ideology of the Young Turk regime once it had gained power. As emphasised by its senior politicians, the party was ‘struggling for the establishment of national firms, a national bank and the unification of the Muslim tradesmen and merchants in associations’.287 Greeks and Armenians were seen as a hindrance to this emerging economic community, both by ‘National Economy’ writers, as well as by the new Turkish business class. In 1913, mass boycotts were organised against Christian shops, branding those who purchased there traitors.288 Once the World War had started and foreign treaties were abrogated, the Young Turks had free rein to implement their vision. Trading licenses and shipping permits were given to MuslimTurkish businessmen to the exclusion of Christians. Joint-stock companies were set up in cooperation between party members and Turkish entrepreneurs, creating a close symbiosis that would carry into the early years of the Republic.289 The idea of an homogeneous ‘National Economy’ did not, on its own, cause the deportation and atrocities against Greeks and Armenians in the empire’s final days. However, the Listian idea that domestic industrialisation was key to national survival, combined with the Young Turk supposition that Ottoman Armenians and Greeks were in league with foreigners inhibiting this industrialisation, aided plans to expropriate and expel these groups. The frequency with which the organisers of the Armenian genocide invoked economic reasons for their actions is indeed striking and suggests the construction of a Muslim-Turkish bourgeoisie with confiscated Armenian capital was an important motivation for their actions.290 When confronted by the

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American ambassador in 1915 to explain the treatment of the Armenians, Talaat Pasha (1874–1921), as Minister of the Interior one of the driving forces behind the genocide, stated: ‘In the first place, they have enriched themselves at the expense of the Turks.’291 Moreover, the Young Turk administration followed up on this rhetoric by creating an organisational structure that, having expelled Armenians from their homes, quickly confiscated and distributed their property to Turkish recipients.292 Under Talaat’s direction, an Abandoned Properties Commission with branches in the provinces was set up to structure the plundering. Armenian bank accounts were confiscated and their deposits transferred to the Ottoman Bank. Armenians were ordered to draw up inventories of their goods, and leave any property behind when deported.293 After most of the Armenian population had been sent on the gruelling killing marches to the Syrian desert, Talaat issued his notorious order of 6 January 1916, which laconically read: The movable property left by the Armenians should be conserved for long-term preservation, and for the sake of an increase of Muslim businesses in our country, companies need to be established strictly made up of Muslims. [T]he vouchers need to be half a lira or one lira and registered to their names to preclude that the capital falls in foreign hands. The growth of entrepreneurship in the minds of Muslim people needs to be monitored, and this endeavour and the results of its implementation needs to be reported to the Ministry step by step.294

This order demonstrates the gruesome logic of the Young Turk program for a homogeneous ‘National Economy’.295 Economic nationalism had now entered the twentieth century.

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5 The Nationalist as Saviour, 1914–1945

5.1 Introduction The economic downturns, political instability and warfare between 1914 and 1945 led to the resurgence of isolationist nationalism. Because many of these crises were of a global nature, the trend towards isolation was global too.1 The requirements of mobilisation for World War I led to a sharp increase in trade barriers in the belligerent countries as governments scrambled to secure wartime imports of raw materials with increasingly scarce foreign exchange. Peace in 1919 brought little solace. Domestic industries were often unwilling to let go of protection and political conflict both between and within states increased macroeconomic volatility. In the early 1920s, governments in continental Europe faced galloping rates of inflation, gyrating exchange rates and capital flight. None of these factors were conducive to establishing an environment in which international transactions could be conducted. The mid-1920s brought some recovery as currencies were tied to gold and exchange rates stabilised, so that international capital flows and trade volumes rose steeply. Government policy became more predictable in those countries where instability had been highest, such as Germany and China. Yet growth plummeted abruptly after 1929 when the Great Depression ushered in an era of economic contraction and deflation. The causes of the Depression included restrictive monetary policy in the United States, but it is clear that the crisis quickly spread worldwide through the network of capital flows and debts that had formed over the preceding decade. Faced with falling prices and limited capacity for domestic fiscal measures, policymakers resorted to trade barriers and capital controls once more. This did little to stem the tide of discontent, and governments from Brazil to Romania were toppled by increasingly radical opposition movements. Once in power, the new regimes imposed even starker autarkic measures.2 These developments had momentous effects on the way nationalists approached the economy. The surging barriers to international exchange accelerated the tendency to view economic relations as taking place primarily within large empires or trading blocs. Such considerations gave rise to 121

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attempts by British statesmen such as Leo Amery (1873–1955) to build a united British Empire comprising the motherland and its settler dominions. This marked a clear departure from the traditional British advocacy of free trade. In Germany, Adolf Hitler’s (1889–1945) genocidal quest for Lebensraum was in part based on his apocalyptic view of escalating international competition, which he believed required access to land and resources in an expanding but autarkic empire. Furthermore, trade was no longer the main arena of conflict for interwar economic nationalists. Whereas nineteenth-century nationalism had mainly focused on tariffs, attempts to control international financial flows now took centre stage. This was a reflection of the increasing volume of capital flows in the last decades before World War I and also of their role in spreading economic shocks during the 1920s and 1930s. John Maynard Keynes (1883– 1946) saw cross-border capital mobility as undermining the autonomy of domestic policy. Early Brazilian nationalists worried about foreign investment in resource industries. Often, aversion to finance affected domestic preoccupations as well. The equation of international finance with ‘Jewishness’ played a large part in Nazi economic programmes, as it did in Romania. Fascists in these two countries translated their aversion to commerce and finance into bids to build an ethnically homogeneous economy. The trend towards government intervention is another distinctive feature of this period. The economic nationalism of the previous century had generally been associated with light regulatory measures. Now state involvement became much more direct. In many countries, including China, this was due to the exigencies of warfare. Dirigisme was coupled with a trend towards technocratic management and planning. Often, this commitment to technocracy and efficiency paved the way for economic justifications of dictatorship. Such ideas formed a basis for the Fascist regime of Benito Mussolini (1883–1945) in Italy. Sometimes, government intervention did not require a formal state or autocracy. Zionist planners in British-held Palestine developed the concept of ‘national capital’ to steer resources into land settlement and to protect the wages of Jewish workers. Viewed from a long-term perspective, however, the way policymakers responded to the interwar crises also built on existing nationalist doctrines. In many instances, these doctrines had been developing for many decades.3 Nation-builders in Palestine harked back to German and Russian agrarian discourses of the prewar period. Protectionists in the British Empire looked to Listian thought. For early Nazi economists, the historical schools and especially Romantics like Adam Müller provided the main sources of inspiration. Chinese thinkers such as Sun Yat-sen (1866–1925) reacted to a century of Western imperial expansion. Others reworked and often transcended List’s old doctrines. This was mainly the doing of Mihail Manoilescu (1891–1950), a Romanian economist of transnational influence in the interwar period.

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Viewed from this perspective, economic nationalism in the interwar period appears less like a sharp break with a past era of unfettered globalisation, but more like the continuation and sharpening of its underlying trends.

5.2 ‘Men, Money and Markets’ in the British World At the start of World War I, Great Britain was one of the most open economies in the world. While continental European governments had raised trade barriers in the late nineteenth century, British policy remained firmly committed to maintaining free trade. British ships traded not only with the furthest reaches of the Empire from Egypt to the Caribbean, but worldwide. British migrants settled in the booming British dominions of Canada, Australia, New Zealand and South Africa. They also left for non-imperial destinations in Argentina and the United States. British capital followed migrants and merchandise, building public utilities in South America and Egypt. Intellectual trends and the threads of finance met in London, its cosmopolitan hub. Britain was globalisation.4 This conception of Britain underwent dramatic changes in the interwar period. By the time victory in the Second World War was certain, policymakers had come to view Britain as a national economy, one that was in need of insulation from the pressures of the outside world. This reorientation of a global trading nation towards a ‘little England’, as some contemporaries derisively called it, was a highly fraught and contested process. Apart from the old understanding of Britain as a global trading power and the emerging paradigm of a national economy, a third vision also gained traction during the interwar period. Imperial visionaries built on the idea of a ‘Greater Britain’, imagining a protected and self-sufficient Empire centred around the regions of white settlement in the antipodes, North America and the British Isles themselves. The contest between these three projects, the old ideal of a globalising Britain, the dream of a unified Empire and the pull of a national economy, explains the gyrations of British interwar policy.5 The fundament of a unified Empire was the Listian idea that survival in a world of high trade barriers required access to larger territories. One unified Empire, tied together by ‘men, money and markets’ would also be able to better protect itself against external competition. This fitted with the trend of the time to view trade as taking place within largely autarkic blocs. There were, however, two powerful factors working against this imperial vision. First, the dominions of the British Empire had their own interests. Australia and Canada sought to protect their domestic industries, at the exclusion of British manufactures. Second, economists within Britain viewed foreign entanglements as detrimental to macroeconomic stability. John Maynard Keynes warned of the disruptive effects of foreign capital flows and preferred autonomy for national policymakers. Moreover,

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champions of imperial self-sufficiency also had to reckon with stiff resistance from pro-globalisation liberals. *

The nineteenth-century vision of globalisation still exerted a powerful influence on interwar policymakers. No individual better demonstrates this than Winston Churchill (1874–1965), who served as Chancellor of the Exchequer between 1924 and 1929. For Churchill, economic order was based on two core tenets of classical economics. First, trade barriers were to be kept to a minimum. This position was sacrosanct: not only was it built on the authority of great British economists since the days of Adam Smith, but it made practical sense. British industry, Churchill held, needed to be exposed to the challenging conditions of competition from abroad to maintain its pre-eminence. Economic openness was also backed by the growing labour movement, because imports of grain enabled the ‘cheap loaf’ that fed the British working classes.6 The second tenet of Churchill’s orthodoxy was the gold standard. The pound sterling was convertible into gold at a fixed rate, which implied that the exchange rate between sterling and other gold currencies was fixed. This spurred trade and investment abroad, ensuring the towering position of the City of London in the global finance and insurance industries.7 Under Churchill’s stewardship, the Treasury remained a bulwark of free trade and Britain’s return to gold at the prewar parity became its utmost priority. This proved to be a mistake, as Keynes rightly foresaw: by the 1920s, wartime dislocation and wage inflation had eroded the competitiveness of British export industries. The high interest rates needed to stem capital outflows and force down wages only created unemployment because wages refused to budge in the face of assertive labour unions. Unemployment became the chronic blight of the British interwar economy and one that Churchill’s orthodoxy was unequipped to solve.8 Yet orthodoxy proved stubborn. For Churchill, and for much of the public, belief in free trade and the gold standard was more than just an economic opinion, it was an integral facet of liberal identity.9 This identity was closely bound up with Britain’s place in the world, and with the Empire. To Churchill and to liberal economists since J. S. Mill, Britain’s mission in the world was the promotion of free exchange and the Empire was a crucial tool to do this. British policy enforced free trade through diplomatic pressure, as in the case of the Ottoman Empire (Section 4.5) or through political control, as in the case of its direct colonies (Section 4.4). Yet there was a notable exception to this rule: Britain stopped short of impressing free trade on its self-governing dominions of Canada, Australia, New Zealand and South Africa. British merchandise could easily enter dependent colonies

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such as India, where local autonomy was closely circumscribed, but trade with the settler dominions such as Canada was subject to higher duties. Moreover, the British government did not attempt to direct the movement of capital, goods or people towards destinations in the dominions.10 What tied Britain to its predominantly white-ruled dependencies in Canada and the southern hemisphere was economic complementarity and a feeling of shared British identity. British industrial exports complemented imports of food and raw materials from the dominions. The development of mines, farms and infrastructure in the dependencies offered fertile opportunities for British capital and workers. Once migrants settled in the antipodes, the networks of information, contacts and kinship they created reinforced the ties between the metropolis and Dominion. Economic intervention by Imperial authorities did not seem required. ‘Greater Britain’, the union of motherland and dominions, was self-sustaining.11 Nonetheless, this liberal imperialism was increasingly questioned in Britain in the three decades before World War I. Not for its imperialism, to be sure, but for its liberalism. Whereas Churchill viewed competition as the fire steeling British industry, Joseph Chamberlain (1836–1914) viewed it as a threat. The market share of British firms in the Dominions was slowly eroding as German, American and Japanese competition grew, so that Chamberlain as Secretary for the Colonies from 1895 to 1903 questioned whether free trade would continue to hold the Empire together.12 ‘We have to cement the union of the States beyond the seas’, Chamberlain inveighed, ‘we have to consolidate the British race; we have to meet the clash of competition’.13 Why was the German Empire united behind tariff walls, while its fractured British counterpart did not even permit itself a common trade policy?14 The white Dominions were a natural extension of Britain by virtue of race and culture, Chamberlain argued, leaving little doubt as to the racialist underpinnings of his imperial design. He proceeded to call upon Britons to ‘cultivate the trade with your own people’ through a system of preferential tariffs.15 Protected from the outside, imperial trade would revive. Bound together economically, the Empire would eventually become a unified state.16 Chamberlain’s Tariff Reform League therefore aspired to conduct economic nation-building on a transcontinental scale. These ideas came not only from observing German policy at work, but also from the writings of German economists, including List and the Historical School.17 However, any talk of protectionism had to be carefully couched in terms agreeable to British audiences. Tariffs would lead to rising food prices, Chamberlain conceded, but this was a ‘sacrifice for the Empire’. Protection was also not a retreat to an insular ‘little England’. It was a policy of more imperialism designed to defend the ‘future union of the British race’ against foreign threats.18 And had not the great Adam Smith himself written that ‘defence is greater than opulence’?19 Nonetheless, such heresy was too much to

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bear for many liberals. Joseph Chamberlain and his followers eventually aligned themselves with the Conservative Party, which thus acquired an important, though not dominant, protectionist colouring before the war.20 It took World War I to breathe new life into the vision of a protected ‘Greater Britain’. Increased military and social spending mandated the imposition of revenue tariffs, which proved difficult to remove once established. The war effort also highlighted the economic role of empire as a source of food and raw materials. Finally, British military campaigns became increasingly reliant on the manpower the Empire provided. Indian soldiers fought in Mesopotamia, while Australian and New Zealand troops struggled at Gallipoli. At the same time, war had spurred the independence movements in India and Ireland (Section 4.4). Just as imperial resources became economically and militarily crucial, the tenuous nature of existing imperial links was revealed.21 It is therefore no surprise that ideas in the mould of a ‘Greater Britain’ fell on fertile ground in British postwar cabinets. One of Joseph Chamberlain’s most dedicated heirs was Leo Amery, who took over as Colonial Secretary in 1924.22 A Conservative protectionist, Amery attempted to dispel the popular image of free trade as quintessentially ‘British’. Many of his arguments were wellestablished talking points that had already been raised by List, including the idea that British power and prosperity had historically sprung from protectionism.23 Free trade, on the other hand, was weakening the Empire. It had impoverished India and Ireland, Amery believed, giving the colonies cause for rebellion.24 Contrary to the expectations of nationalists in the colonies, however, homespun goods would not provide the answer.25 Times had changed, stressed Amery. Technological advances had given rise to more capital-intensive modes of production that increased the fixed costs of operating a factory. Only large plants could now be operated profitably. These industrial behemoths required a steady source of raw materials and expansive markets to survive.26 The tendency of the times, the Colonial Secretary believed, was therefore to coalesce in large protected trading blocs which could supply both resources and markets. These blocs provided a third way between national self-sufficiency and globalisation, he argued, so that ‘the idea of European union will, in the long run, win its way against extreme nationalists and against internationalists’. Amery thus managed to provide a Listian interpretation of a potential European integration (Section 8.3). Britain and its dominions now faced the choice which bloc they should join: ‘The nations of the British Commonwealth are subject to the same world tendency. They can maintain and develop their existing unity in active co-operation. Or they can attach themselves to other unities, European or American, for the fulfilment of their security and their growth. But they cannot stand alone.’27

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For the imperialist Amery, the choice was of course easy. Economic complementarity and common heritage mandated that Britain’s place was with its Empire, rather than with the United States or a United Europe. Anything else was to see ‘the prospect of an England . . . surrendering, with perhaps an occasional spasm of futile resistance, her proud world position, sinking politically as well as economically, into the ranks of the lesser European powers’.28 British and dominion governments should therefore work incessantly to privilege the exchange of migrants, capital and goods within the Empire.29 Importantly, Amery’s imperial vision reflected not just metropolitan designs; it found resonance in the Dominions too. ‘It is . . . essential to remember’, the Australian Prime Minister Stanley Bruce (1883–1967) declared in the Australian Parliament in 1926, ‘that the British Empire is one great nation . . . the British people represent one nation and not many nations as some have endeavoured to suggest’. Like Amery, Bruce saw ‘men, money and markets’ as the arteries of this Britannic unity.30 ‘Men’ was put into legislation relatively quickly. The 1922 Empire Settlement Act, to which Amery contributed as undersecretary, enabled subsidised migration from Britain to the Dominions, in particular to Australia. This had the advantage of keeping migrants within the Empire, where they could serve as farmers, miners and potential soldiers. ‘Money’ followed in 1929 with the Colonial Development Act. This provided for an imperial development fund of loans and grants upon which British dependencies could draw. In effect, it was an attempt to steer British capital to imperial destinations. Moreover, it would privilege investment in development projects that would directly increase demand for British machinery exports, again strengthening imperial links.31 Naturally, demand for British exports also served the British economy. Amery’s attempts at Britannic nation-building could not rely only on a reinvigorated imperial vision. This vision needed to connect to constituents’ immediate economic concerns. Yet Amery’s constituents were national, not imperial, and their main concern was unemployment. Both colonial settlement and development policies were therefore presented as measures to relieve pressures on the domestic labour market. Sponsored outmigration would present a safety valve for unemployed workers. Guided investment in British possessions would create demand for British capital goods, employing British workers in struggling export industries. The design was imperial, but the political support came from British voters pursuing domestic interests.32 The hardest battle was fought over ‘markets’. On this front, the free traders proved to be the main adversaries. The protectionist Conservatives were pounded at the general election of 1923 and Churchill’s subsequent resistance ensured that a formal system of Imperial protection did not develop traction in cabinet. For the next decade, Amery had to be content with the traditional second-best tool of economic nationalists: informal protection

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through consumer efforts. These were coordinated through the Empire Marketing Board (EMB), founded by Amery in 1926. The EMB reached millions of consumers through coordinated campaigns in Britain and the dominions, using the newly emerging media of film and radio alongside traditional ‘Buy Empire’ propaganda posters.33 Publicity campaigns were accompanied by ‘Empire Shopping Weeks’ in Britain, Canada, South Africa and Australia. Producer interests were clearly involved, with local and imperial business associations benefiting from advertising. Yet ‘Empire Shopping’ was also a consumer-based movement, ironically not unlike the anti-British Swadeshi campaigns galvanising Indian nationalists at the same time. The main initiator of ‘Empire Shopping’ was the British Women’s Patriotic League, a Conservative organisation promulgating the role of women as shoppers and housewives in strengthening imperial bonds. Regular household purchases were now transformed into affirmations of the economic relationships that connected the ‘Anglo-Saxon race’ across the oceans. Having housewives select patriotic ingredients for the Empire Christmas Pudding (‘5 lbs. of sultanas: Australia; 1.5 lbs. of minced apple: Canada’) became a way of exploiting existing gender stereotypes in the service of imperial nationbuilding.34 Yet even Amery’s top-down tariff policy was not quite dead, and once more, external factors came to the rescue of ‘Greater Britain’. The onset of Depression after 1929 heightened support for protection as export markets collapsed. Pressure on sterling increased in the wake of chronic balance of payments deficits and capital flight to the United States. Tariffs provided a solution, balancing the external accounts without sacrificing the link to gold. However, Britain’s trade partners reacted in kind, so that trade wars intensified as the Depression deepened. This foreclosed the reliance on export markets that had been central to strategies of a Britain built on globalisation. Matters became more urgent as the United States imposed the infamous Smoot-Hawley Tariff in 1930. With other options foreclosed, turning to imperial markets was the logical step.35 Politically, the free traders were now on the defensive. Churchill was out, and Joseph Chamberlain’s son Neville took his position at the Treasury under a coalition ‘National Government’ in 1931. Neville Chamberlain (1869–1940) wasted no time in implementing the Conservatives’ long-cherished plans for protection, proud to have been accorded ‘the privilege of setting the seal on the work which the father began but had perforce to leave unfinished’.36 After almost a century of openness, Britain now erected comprehensive tariff walls. Preference for intra-imperial trade was first granted provisionally and then formally the next year after negotiations with the Dominions at Ottawa had been completed. Intra-imperial trade surged, and the British world was now on the way to becoming the self-sufficient trading bloc the visionaries had always dreamt of.37

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Imperial unity enjoyed its brief efflorescence after Ottawa, but it eventually proved to be chimeric. Why did the Britannic economic union fail? In the Dominions, acceptance of union was always conditional. This was the case even in Australia, the most ‘British’ of the territories. Australian nationalists, ever fearful of being ‘overwhelmed’ by Australia’s sizeable Asian neighbours, were focused on maximising the size of the country’s white settler population. Accordingly, the ‘White Australia Policy’ since 1901 limited immigration to British and Irish settlers at the expense of migrants from Asia. This was quite compatible with Chamberlain’s and Amery’s efforts to ‘consolidate the British race’. However, other elements of Australian policy ran counter to imperial interests. This occurred because Australia’s ability to attract British migrants was predicated on the high wages its firms could afford to pay. By the 1920s, Australian economists had become sceptical whether agriculture and mining, the country’s traditional sectors, would be able to continue doing so. Both sectors were based on finite inputs, namely land and natural resources, and continued migration into these sectors would depress wages. This would eventually choke off further British migration and with it the growth of the settler population. Industry, on the other hand, suffered from no such physical constraints. Driven by technological advances, industry offered increasing returns and hence the potential for wage growth. Australia therefore started to protect its infant industries heavily.38 These tariff barriers, which also excluded British goods, clearly undercut Britannic economic unity. In one particularly public incident in 1934, retailers in the British textile heartland of Lancashire organised a boycott against Australian food imports. This was in protest against the tariffs imposed on British cotton goods in Australia.39 Keith Hancock, one of the most prominent observers of Australian affairs, succinctly summed up the paradox of Dominion and Britannic economic nationalism in 1930: ‘The aim of Australia is to encourage the British manufacturer at the expense of the foreign manufacturer, but also at the same time to encourage the Australian manufacturer at the expense of both the foreign and the British manufacturer. Of these two aims, the latter is the really essential one.’40 Union with the other dominions proved to be even more problematic. Canada had cultivated its own ‘National Policy’ since at least the Macdonald government of 1878. Canadian economic nationalism was in part a reaction to, and in many ways inspired by, Henry Carey and the neighbouring ‘American System’ (Section 2.6). Like its counterpart south of the border, the Canadian ‘National Policy’ encompassed industrialisation through protective tariffs, transcontinental infrastructure investments and an expansion of settlement. By the interwar period, the Canadian heartland had developed an industrial base fuelled by local mining and forestry products that Canadian governments were hesitant to expose to competition from British manufacturers. Accordingly, ‘Empire Shopping Weeks’ were quickly replaced by ‘Made-in-Canada’ events. Moreover, Canadian

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politicians were uneasy about inclusion into Leo Amery’s imperial settlement scheme, apprehensive of the country becoming a destination for the chronically unemployable from Britain. Ethnic tension loomed, too: imperial loyalty gained little currency among the French-speaking Quebecois.41 In Britain itself, economic interests often pulled away from imperial integration. British tariff concessions to the dominions at Ottawa limited its freedom to contract with third parties outside the Empire, primarily Argentina and Scandinavian countries. These trade partners were important, and often cheaper, suppliers of foodstuffs. But any accord with them weakened the benefit Britain could accord to its dominions through imperial preference. The dominions, for their part, were unwilling to cut back significantly on their own industrial protection, unless it were in exchange for significant British concessions on agriculture. However, any trade agreement on food, whether to imperial or third party producers, would undermine the position of British farmers, a domestic constituency hard-hit by the Depression. British trade negotiators were hesitant to commit firmly to any option, be it global, imperial or national, and attempted to muddle through. As a result, the deliberations with the dominions dragged out into acrimonious horse-trading, rather than creating the envisaged foundation of Britannic unity. Domestic considerations figured prominently, in Britain and the dominions. Eventually, the British world became a world of separate national economies.42 In the end, however, the dominant domestic consideration in the 1930s became not ‘markets’, but ‘money’. This was in part the work of Keynes.43 Keynes often adapted his convictions to changing economic environments, but if there was one constancy to his thought, it was the conviction that domestic governments needed the freedom to conduct independent macroeconomic policy. This required severing at least some links with the global economy. Depending on the situation, this could involve tariffs, capital controls or the abandonment of the fixed exchange rate regime of the gold standard.44 Such Keynesian prescriptions clearly limit international integration. They encouraged the turn towards domestic solutions at the end of the interwar period in Britain and elsewhere. In addition, Keynes’ planning for the postwar order at the 1944 Bretton-Woods Conference would privilege the role of domestic policymaking for decades to come.45 However, Keynesian theories that seek domestic policy autonomy to fight unemployment are not necessarily nationalist, unless they are purposefully connected to nationalist goals such as furthering national unity or strength.46 While this may not have been true of Keynes’ work in general, his defence of domestic autonomy did sometimes veer into a more explicitly nationalist opposition to globalisation. The infamous example is his lecture on National Self-Sufficiency, which he delivered to an audience of Irish economists and statesmen in Dublin in 1933. It is no coincidence that Keynes chose Ireland, a stronghold of economic nationalism which was in the midst of a trade war with Britain, as the venue for his lecture

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(Section 4.4). What he had to say raised eyebrows on both sides of the Irish Sea, going beyond his usual instrumentalist advocacy of protection.47 The human cost of the Great Depression, Keynes mused, had led to a profound shift in attitudes.48 The promises of globalisation had proven hollow, ‘[t]he decadent international but individualistic capitalism, in the hands of which we found ourselves after the war, is not a success. It is not intelligent, not beautiful, it is not just, it is not virtuous; and it doesn’t deliver the goods’.49 There were of course drawbacks to hasty and sudden disintegration, but ‘I sympathise, therefore, with those who would minimise, rather than with those who would maximise, economic entanglement between nations ...’ Some commentators have judged Keynes’ lecture to come close to an endorsement of fascism. For others, including his biographer Robert Skidelsky, Keynes ‘seemed to swing full-circle from Adam Smith to Friedrich List’.50 In fact, Keynes’ argument was essentially the same as the one made by Johann Gottlieb Fichte 130 years earlier, who saw free trade as the root cause of international conflict and domestic instability (Section 3.3).51 Excessive international specialisation, Keynes stressed, led to attempts at ‘[t]he protection of a country’s existing foreign interests, the capture of new markets, the progress of economic imperialism’.52 Yet the world of which imperial enthusiasts dreamt had become a mirage, because their control over trade and capital was eroding. Instead, unfettered capital markets had separated asset ownership from asset control, so that local enterprises were now owned ‘by a speculator in Chicago’.53 Such denationalisation ‘is an evil in the relations between men, likely or certain in the long run to set up strains and enmities which will bring to nought the financial calculation’. The trade war between Britain and Ireland, Keynes pointed out, provided an illustration of the dangers of cross-national integration: ‘if you owed us no money, if we had never owned your land, if the exchange of goods were on a scale which made the question one of minor importance to the producers of both countries, it would be much easier to be friends’.54 Not only is Keynes’ reasoning on the relationship between trade and conflict similar to Fichte, so is his focus on monetary isolation as the key to peace. Adding a firm dose of Swadeshi, Keynes continued, ‘let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national’.55 For both Fichte and Keynes, national currencies made for domestic unity and international accord. Keynes’ similarity to Fichte is best understood when remembering that Keynes was not only an economist, but also a philosopher. In his early days, he had been deeply infused with the ethics of the avant-garde Bloomsbury Set. Despite his personal success in currency speculation, he held ‘Love of Money’ in deep contempt.56 He distrusted the excesses of a casino capitalism that knew no value apart from that countable in money.57 It sacrificed ‘the tillers of the

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soil and destroy[ed] the age-long human traditions attendant on husbandry, if we could get a loaf of bread thereby a tenth of a penny cheaper’.58 There was no room for the Romantic in such a global system. Only the remedy of isolation would give occasion for each nation to develop its own culture and ideals, to realise ‘our own favourite experiments towards the ideal social Republic of the future’.59 Keynes noted that ‘Italy, Ireland, Germany, have cast their eyes or are casting them towards new modes of political economy. Many more countries after them, I predict, will seek, one by one, after new economic gods’.60 Keynes accurately predicted that ‘new economic gods’ would be worshipped on the European continent, but these cults would not hold the promise of peace he sought.

5.3 Nazi Economics: The Revolution Devours Its Parents The disaffection with the liberal order that knocked Great Britain and its dominions out of the integrated world economy manifested itself in Germany with an unparalleled greater force. Defeat in World War I imposed the obligation to pay monetary reparations to the victorious allies under the Treaty of Versailles (1919). The democratic government of the newly established Weimar Republic reacted with a loose monetary and fiscal policy that opened the flood gates to the hyperinflation of 1923. This succeeded in wiping out the savings of the German middle classes and eroded the already fragile support for the new democracy. Although the stabilisation of the mark and an inflow of American loans established a semblance of stability in the mid-1920s, this was rudely shattered by the Great Depression. This led to a repatriation of American capital in 1929, to which the German government responded by imposing a debilitating regime of austerity on the economy. As banks imploded, wages and prices fell, and unemployment skyrocketed, votes for the National Socialist Party of Adolf Hitler rose ominously. The rapid succession of economic crises thus paved the way for the Nazi ascension to power on 30 January 1933. Moreover, the interwar crises shaped the way ordinary Germans, as well as the Nazi leadership, viewed the future of the German economy.61 However, the economic programme of the Nazi Party was not only the result of the shocks pummelling the German interwar economy, however immense they were. German nationalists (and at the extreme end of that spectrum, the Nazis) reacted to the crises of the interwar on the basis of established beliefs regarding the relationship between the nation and the world economy. These beliefs had developed over many decades.62 As we have seen in Section 4.2, many economists in Germany had already espoused an ideology of aggressive expansionism by the time of World War I. Hitler and his acolytes built on this existing current in German thinking. In addition, they drew heavily on Romantic ideas propounding

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the creation of organicist economic communities that already contained strong antisemitic strains. Hitler combined and often abridged these ideas, meshing them with his venomous racial world view, when he committed his creed to paper in Mein Kampf in 1925. But many of the intellectual building blocks he used were readily available. And many German economists were not averse to this reworking of their oeuvre. Over the ensuing decade, prominent conservative figures such as the romanticist Othmar Spann (1878–1950) and the historicist Werner Sombart (1863–1941) entered into a dialogue with leading Nazi Party members in an attempt to ensure their imprint on the growing party. These conservatives were eventually pushed aside by Hitler, but only after he had successfully secured power in Germany. At that point, the stage was already set for the atrocities of the Nazi regime. *

Many pages of Mein Kampf and subsequent Nazi publications on economic matters betray the close influence of Othmar Spann. An arch-conservative professor of economics at Vienna, Spann had in 1907 come across a copy of Adam Müller’s work in an antiquarian book store (Section 3.3).63 The accidental discovery converted Spann to romanticist economics: ‘Adam Müller’, Spann exclaimed, had ‘with the intuition of genius’ grasped the economy as a living collective. This insight was ‘the fundament and the soil, from which springs all fertility, all life, blossoming and flowering of an economy’. Spann believed that this organicism had allowed Müller, and those who had supposedly followed him, such as Friedrich List and Henry Carey, to cast aside the ‘false’ individualistic world view of liberalism and the associated theory of free trade.64 From that date on, Spann devoted himself entirely to spreading Müller’s doctrine, gathering a faithful and growing band of disciples. In doing so, Spann became, in the words of his colleague Sombart, ‘the most influential German economist’.65 It may seem odd that the thinking of Adam Müller, a man who had been ridiculed as ‘backward’ by his own contemporaries a century earlier, would become the lodestar for a new Germany in the interwar period. The real appeal of both Spann and Müller, however, lay not in a return to a putative medieval golden age, but in the promise of economic stability. Both Romantics believed that stability could not be achieved through practical measures such as trade barriers. Spann’s thrust went even deeper, and he saw stability as arising from the creation of an organicist economic community, one in touch with the nation’s ethnic (völkisch) and religious spirit. This was not a just reactionary return to the past, but seen as a revolutionary reshaping of the economy rooted in the supposedly perennial character of the Volk.66 This entailed a fundamental rejection of economic modernity. Spann wrote endlessly on the crises of democracy, capitalism and Marxism, which all sprang

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from the twin evils of rationalism and materialism. His solution was to sweep away these false un-German ideas by rejecting individual autonomy in favour of the community.67 Practically speaking, there was to be ‘communal administration of private property’ through the intervention of state and corporate organs. A corporatist economic structure would mean that each individual was embedded within their professional organisation and trade union, thus ensuring harmony between individual and community interests.68 Each corporate organ in turn was to be supervised by the state, guaranteeing stability and harmony between industries. For the most part, however, there would not be too much to regulate: corporative organs and industrial associations would supply their members with most of their needs and trade would be reduced to a minimum. Instead of exchange, that most un-German and wasteful of occupations, craftsmen could focus on production.69 Völkisch rootedness would take care of the rest. These were fuzzy ideas, but the corporatist ideal was nonetheless influential in the interwar period, with similar concepts making headway in Italy (Section 5.6). Spann himself saw this ideal order as inspired by the supposedly communal economy of the ancient Germanic tribes. This Germanic order had subsequently found its glorious apogee in the guilds of medieval Christendom, before being destroyed by egotistic individualists in the early modern period.70 Who were these individualists who had sacrificed Germanic harmony on the altar of economic self-interest? Spann’s colleague Werner Sombart thought he had found the answer in his book Jews and Modern Capitalism (1911). Sombart was a veteran of the historicist method, a student of Gustav Schmoller and the successor of Adolph Wagner as Professor of Economics in Berlin. Like many of his peers in the historical school, he saw capitalism as a modern, recent phenomenon.71 The realisation that capitalism was ‘modern’ carried with it an academic interest in uncovering its roots. Sombart’s work on Jews and capitalism was mainly written in this context. It constituted a reply to Max Weber: whereas Weber had located the wellspring of modern entrepreneurship in the ‘Protestant spirit’, Sombart attempted to locate the origins of capitalism in Judaism. Yet throughout his work, Sombart increasingly relaxed his academic commitment to value-free inquiry, and the result came quite close to an antisemitic pamphlet.72 Sombart divided his work into three parts. The argument in the first part revolves around his hypothesis that, since the sixteenth century, most flourishing commercial activity in Europe had been of Jewish origin. The notion of Jewish economic vitality, while historically inaccurate as a generalisation, could of course also be interpreted as philosemitic. Indeed some economic nationalists, including List, had used this idea to advocate Jewish immigration. Yet Sombart’s aim was different. He set out to argue that capitalism, as a whole, was Jewish: the growth of international trade, colonial exchange, the modern state, financial markets and stock exchanges, on all roads to modernity,

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Sombart sees Jews in the driving seat.73 Since the late nineteenth century, according to Sombart, Jewish influence had become preponderant. The rapid ‘commercialisation’ of industry implied that ‘the stock brokers of the banks became evermore the rulers of commercial life’.74 A solid German armaments manufacturer such as Krupp was now of the old guard, yielding to mobile ‘traders’ and financiers. Largely relying on guesswork, Sombart compiled statistical tables to demonstrate the proportion of Jews as directors in major German companies, brandishing the conclusion that as one percent of the population, Jews held at least one seventh of all directorships. He suggested that this should ‘prove to everyone that our economy is to an increasing extent subject to Jewish influence’.75 Sombart devoted the second part of his book to the argument that Jewish commercial success was due to a ‘specific Jewish commercial attitude’ (Wirtschaftsgesinnung), which included a ruthless pursuit of profit, a predisposition to fraud and egotistic free trade.76 Embracing his Romanticist side, Sombart contrasted this ‘Jewish’ profiteering to the ethical ‘Christian’ craftsmen of old, who strove for sustenance, rather than profit. These traditional artisans supplied ‘good and honest ware’ under the aegis of benevolent medieval or mercantilist states. Competition was kept at bay, and only directed towards foreigners. ‘Each person . . . was still his own master’, Sombart reminisced longingly, ‘the merchant had poise and pride’. Persistent Jewish flouting of the guild rules destroyed this paradise: ‘The Jews then stormed this established order’.77 Throughout the second part, Sombart’s logic became increasingly circular – over long sections he cites complaints by Christian craftsmen about the business demeanour of their Jewish competitors. He then proceeded to treat this prevalence of antisemitism as evidence for the existence of a particular Jewish nefariousness.78 In the third section of his work, Sombart explored the origins of this ‘Jewish particularity’. These traits, he claimed, were in part due to religious factors, because free trade was a divine law in Judaism.79 He then proceeded to entertain ideas of racial determinism.80 For sure, Sombart conceded, the scientific evidence was thin, but ‘common sense’ nonetheless suggested that there was ‘an origin of this essence in the blood’. Sombart thus managed to combine economic and racial antisemitism.81 Despite its speculative character, Sombart’s work quickly became a bestseller upon its publication in 1911. Sombart launched an accompanying public lecture series, drawing huge audiences across Germany. Yet few accepted the work in its entirety. Professed antisemites lauded the parade of clichés on ‘Jewish particularity’ in parts two and three, while scoffing at Sombart’s association of Jews with economic success in part one.82 His conclusions placed Sombart himself in a dilemma. Given the fundamental difference between ‘Jewish’ and ‘German’ economic attitudes he thought to have unearthed, the assimilation of Jews in Germany was impossible. Sombart

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therefore supported Jewish emigration to Palestine, where a separate Jewish economy could be constructed.83 At the same time, he feared that the loss of some of its most productive citizens would harm the German economy. This Listian consideration led Sombart to call for wealthy Jews to remain in Germany, where they were to voluntarily limit their competition with Germans to avoid conflict. For obvious reasons, this segregation was unacceptable to the majority of Jewish Germans, who did not view themselves as differing from mainstream German society other than in religious practices.84 At the time of publication, Sombart declined to view his work as antisemitic. His work ‘proved’ the importance of Jews for the development of capitalism, he proclaimed in his introduction. As a result, only readers who were ill-disposed towards capitalism would interpret the work as directed against Jews.85 Given Sombart’s lifelong critique of capitalist modernity, this was a rather disingenuous defence. Many of Sombart’s anti-capitalist readers, including Hitler himself, easily connected the dots Sombart had left bare, and his work eventually became a part of the antisemitic canon in Germany.86 Economic antisemitism sprang from other sources too. Romantic economists such as Adam Müller, who saw money as a constituent element of nationality, had resented alleged Jewish control of finance and laced their writings with antisemitic tropes (Section 3.3). These prejudices found their renaissance in monetary theories of the interwar period. Such theories were initially formulated on the margins of academic economics, propagated by self-taught theorists such as Gottfried Feder (1883–1941). Feder borrowed freely from Romantic, Marxist and fringe monetary thought.87 His core idea was that traditional industry (like Sombart, he uses the example of the German arms manufacturer Krupp) faced diminishing returns. In other words, capital accumulation was slowing down due to satiation, so that enterprises were growing ever more slowly. This was in contrast to the laws of accumulation operating in ‘high finance’. A Jewish bank such as Rothschild lent its capital at interest, encouraging it to grow at a compound rate. Feder heroically projected these trends into the future and concluded that, in a few years, ‘industrial’ capital would have faded into insignificance in the face of exponentially growing ‘financial’ capital.88 The new ‘mammonistic’ world order would see sovereignty squashed by a secretive ‘international power of money, a supranational financial authority enthroned above the rights of national selfdetermination’.89 Had not the ‘Jewish God Yahweh’ exhorted his people to ‘rule over all nations of the earth’?90 In Feder’s view, the situation was particularly dire in Germany given the burden of reparations and the dependence on foreign loans. Here, international finance was a ‘vampire sucking the labour power of the people’. The German obligation to pay interest to the ‘Golden Internationale’ enslaved industrial capitalists, workers and tax payers alike.91 Moreover, this enslavement was based on a gigantic lie, according to Feder’s monetary theory: a sovereign state

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did not even need to issue debt, or indeed raise taxes, to finance its spending. As long as it retained a national currency, government spending would be selffinancing through monetary expansion.92 In order to ‘abolish the slavery of the interest rate’ a common front among all debtors should be created. Once this movement had won power, banks would be nationalised and all ties to international finance would be cut. A golden age of free money would dawn.93 Like that of Müller and Fichte, Feder’s plea was one for monetary autarky and salvation in a truly national currency. Although much of Feder’s approach consisted of a crude mixture of antisemitic conspiracy and half-baked financial concepts, its political usefulness was obvious. Not only did his nationalist monetary theory suggest that a government could painlessly finance its wildest spending promises, it also suggested that the only group standing in its path was a small cabal of international financiers.94 As Hitler later declared in Mein Kampf, Feder’s crucial distinction was between benevolent industrial capital, which was domestic, and malevolent financial capital, which was international. In Hitler’s words, this distinction ‘provided a way to limit the internationalisation of the German economy, without at the same time engaging in a struggle against capital more generally that would endanger the basis for an independent national self-sufficiency’.95 In other words, Feder’s theory ‘showed’ Hitler that autarky was economically feasible, because it suggested that this would preserve the most productive (domestic) capital. Hitler could then direct his propagandistic efforts towards ‘the struggle against international finance and loan capital [which] has become the most important programmatic point in the struggle of the German nation for its economic independence and freedom’.96 If we are to believe Hitler’s account, the impact of Feder’s idea was momentous: ‘After having heard Feder’s first lecture, I realised that I had now found the way to one of the essential preconditions for founding a new party’.97 Whether Feder really provided the spark that lit the powder keg is a moot question. What is telling, is that Hitler (retrospectively) chose to date the inspiration to establish his party to a lecture on economics. Clearly, economic relationships mattered to Hitler, at least from a propagandistic perspective. He was also not hesitant to borrow those building blocks he found useful. This was not limited to Feder’s monetary autarky; it similarly included Spann’s corporatism and Sombart’s economic antisemitism (although Hitler did not reference Spann or Sombart directly in Mein Kampf, their ideas are mentioned in later Party publications).98 This does not mean that economic ideas were paramount to Hitler. He mostly saw economics as a tool, subject to the power of the political will. For him, the state was not an economic organisation, but ‘a community of physically and spiritually similar beings’ that must be defended at all costs.99 Indeed, much of Mein Kampf consists of little else than sprawling diatribes on ‘racial purity’ and ‘domination’. Hitler’s antisemitism was primarily racial, rather than economic. Nonetheless, as Sombart’s example shows,

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racial and economic ideas could reinforce each other and were not always easily separable. Crucially, Hitler’s fundamental aim of an expanded German Lebensraum in the East was based on a social Darwinism that was infused with economic arguments.100 This fusion of social Darwinism, economic competition and fantasies of German domination in the East constituted a pattern of discourse that was not new in German economic debates. Similar argumentative techniques are evident in Weber’s 1895 Inaugural Lecture, even if the argument itself and its degree of sophistication was quite different (Section 3.2). It is worth asking the reader to bear with one detailed example of Hitler’s argumentation, if only to show how his understanding of Lebensraum stood in dialogue with established narratives within German economics.101 Hitler presented the core problem facing Germany as one of excessive population growth outstripping the availability of food. He then evaluated four potential solutions. He briskly dismissed the first option, birth control, as favouring the ‘weak’ and ‘abnormal’.102 Hitler discussed another option at length: ‘to labour through industry and trade for foreign wants’.103 This would involve the opening of foreign markets through colonisation and industrial exports, while food would be imported. This is the option Weber had advocated (and which Imperial Germany had largely followed). But Hitler was critical: such exchange was predicated on tropical countries providing food and raw materials in exchange for manufactured goods. As countries in the south were themselves industrialising, export markets for manufactures from the north were contracting. Competition for markets would intensify. This would lead to military conflict with Britain, as had already happened during the Great War.104 Even more importantly, Allied naval blockades during the war had shown the folly of relying on food imports, and the danger of neglecting ‘farmers as the basis of a healthy nation’. Clearly, agrarian autarky – the third option – was preferable to industrial exports if one was preparing for a new war. It will be remembered that this was essentially the point Adolph Wagner had made twenty years earlier.105 Yet Hitler went beyond Wagner. He discounted this strategy of rural autarky within Germany’s borders on the grounds that it would eventually lead to food shortages. A weakened and smaller population would be unable to defend itself against other ‘races’.106 The fourth option was the conquest of agricultural land in the EastLebensraum. This was Hitler’s genocidal goal: an expanding but autarkic economy with a strong agricultural base feeding a racially pure German population.107 It was a genocidal goal not only because its realisation would always involve a war of conquest, but also because its logic was predicated on the removal and murder of the majority of eastern Europe’s Slavic population: Hitler wanted land, not markets.108 Hitler looked abroad to the existence of other large economic blocs to validate his ambitions. He compared his strategy to the United States, which

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was ‘fundamentally its own continent’. He also looked to Britain, which he thought of as the ruler of a larger ‘Anglo-Saxon world’. He clearly held a much more sanguine view of British imperial unification than even the most ardent defenders of ‘Greater Britain’ (Section 5.2).109 Throughout the remainder of his life, in public speeches and cabinet deliberations, Hitler would obsessively refer back to this basic choice he had outlined in 1925 – remain an exportoriented economy and secure markets abroad, or conquer land nearby and secure the resources and domestic capital for a viable autarky. The solution he gave was always the same.110 This repetition supports the conclusion that, for all their racial delusions, Hitler and the Nazi Party held on to a body of economic ideas that was marked by a certain degree of consistency over time. A brief survey of official Nazi economic literature supports this assertion. The first and only comprehensive party programme, the Twenty-five Points published in 1920, devoted considerable space to economic ideas. This is unsurprising, as the economist Gottfried Feder, who had joined Hitler’s party by that time, was the programme’s principal author.111 The programme commits the Party to corporatism, ‘common interest before self-interest’, agricultural reform, exclusion of Jews and the ‘breaking of interest rate slavery’. Othmar Spann is cited as a prime inspiration.112 In two comments inserted at Hitler’s request in 1928 and 1930, Feder elaborates on these demands. The first insertion clarifies that the ‘struggle against high finance’ is directed specifically against Jews, and that ‘German’ property will be left intact.113 The second insertion details the principal role of agriculture in the sustenance of the Volk.114 Both insertions effectively bring the 1920 programme in line with the subsequently published Mein Kampf. An official 1930 pamphlet by Hans Buchner, a Nazi Party economist, tediously repeats this catechism in his Introduction to NationalSocialist Economics. He extols Müller and Spann’s Romanticism as creating a community based on work, production and shared property, the roots of which are seen in uniquely German racial characteristics.115 Buchner also expounds how Feder’s banishment of international finance, territorial enlargement and agriculture are supposed to create the conditions for flourishing autarky.116 Even Gregor Strasser’s (1892–1934) ‘Emergency Programme’ of 1932, partly designed to present new ideas combating unemployment at the height of the Depression, indulges in many of the same – by then wellestablished – points.117 The correspondence of Nazi literature to some facets of mainstream economic thought in Germany is not surprising. The authors of these programmes stood in close contact with German academic economists, in particular Sombart and Spann. Both thinkers were part of an intellectual movement in bourgeois Weimar society known as the ‘Conservative Revolution’. While not part of the Nazi Party, the nationalist and anticapitalist views expounded by members of the Conservative Revolution

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made them obvious allies. Their main periodical, Die Tat (‘Action’), featured regular contributions expounding the virtues of autarky, agrarianism and medieval corporatism, some written by Sombart’s students. Die Tat based this on the ‘classics’ of economic nationalism, in particular List and the historical schools.118 Gregor Strasser, as one of the most senior Nazis, regularly met with Sombart for programmatic discussions. Hitler publicly visited Spann’s university lectures to great propagandistic acclaim. Politically, the main national-conservative party, the DNVP, was a champion of agrarianism that closely supported Hitler. Once Nazi electoral success put Hitler in power together with the DNVP in 1933, the protagonists of the Conservative Revolution hoped that their support would pay off. A new corporatist institute to reorganise the German economy along the lines of Spann’s ideas, staffed with his followers, was established.119 ‘For a long time, I have been advocating multiple ideas, which are now influencing current politics’, his colleague Sombart wrote jubilantly, explicitly mentioning his own book on Jews and Capitalism. And in 1934, referring to his work in general, he admitted: ‘if one describes this as the economics of the “Third Reich”, I will not find myself in disagreement’.120 In truth, Hitler had little use for his conservative supporters, or for economic theorists, once his power was firmly established. Sombart found himself pushed to the sidelines, his work subject to increasing censorship. He moved away from Hitler’s (and his own erstwhile) racial conceptions, and resigned himself to relative obscurity. ‘We have now become derelict. Those who cannot beat the drum count for nothing now’, he noted despondently.121 The theorist Feder was replaced by slick technocrats such as Hjalmar Schacht (1877– 1970) – men to get Hitler’s job done. Others fared worse. Othmar Spann’s corporatism turned out to be too decentralised a system for the totalitarian Nazi state. Following the annexation of Austria in 1938, Spann was arrested and interned in Dachau concentration camp. Gregor Strasser, too independent a thinker for Hitler’s liking, was killed by the SS in 1934 in the Night of the Long Knives.122 The remaining economists stayed away from policy and safely confined themselves to writing hagiographies of the past masters of economic nationalism. They expressed particular preference for Fichte and List, who were now hailed as harbingers of Nazi economics and a Greater German Reich. Unsurprisingly, they displayed little appetite for exploring the international roots of List’s or Fichte’s thought, or for examining the ambivalent relationship these thinkers had with imperial expansion (Section 3.5).123 Yet the ignominious end of the Conservative Revolution should not obscure the fact that nationalist economists such as Sombart, Spann and Feder were devoured by a revolution of their own making. Hitler at first sought an alliance with economists not because they were irrelevant, but because their ideas held the key to making political inroads into crucial middle-class constituencies.124 The at times eclectic – but not inconsistent – nature of the Nazi Party

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programme reflected the need to fight elections on a platform that catered to the diverse preferences of farmers, craftsmen, small debtors and domestic industrialists.125 Theories of ‘communal interest’ served the propaganda of integrating these disparate groups into one national movement. As the Nazi success at the polls showed, this strategy proved awfully effective. Moreover, as argued above, economic ideas not only paved the way for Hitler’s ascent, but in all likelihood influenced his thinking. These ideas persisted once the Nazi regime was in place. Even practitioners have their own theoretical suppositions and it turned out that the ‘technocrat’ Schacht found the ideas of the ‘theorist’ Feder to be of great practical use when it came to financing Germany’s mushrooming military spending.126 Agriculture, Hitler’s pet project, was effectively reorganised along corporatist lines, with ‘financial capital’ (agricultural credit) tightly regulated.127 Hitler himself remained wedded to the basic choice between Germany as an industrial exporter and autarky. When foreign exchange shortages in 1936 forced Hitler to choose between a re-entry into export markets to earn foreign currency or a strong curtailment of imports under autarky, he took exactly the decision he had ideologically committed himself to a decade earlier.128 Most damningly, there is the contribution of economic writing to German antisemitism. This antisemitism, of course, did not originate in Feder’s or Sombart’s work and it cannot be reduced to its economic dimension. Nazi conceptions of race did not originate in economic analysis. Yet both could reinforce each other. Racial antisemitism was an abstract concept, one that galvanised a core group of Nazi ideologues. Economic prejudices, on the other hand, had a much wider ambit.129 The work of Feder, Sombart and others like it perpetuated and intensified the myth that Jews were fundamentally alien to the German economy. It also insinuated that they dominated banks and businesses and that this domination was harming ordinary Germans in their capacity as consumers, business owners and borrowers. The spread of these falsehoods had far-reaching implications. Policies of economic ostracism enacted by the Nazi regime, especially the seizure of Jewish property, had a catalytic effect in the escalating spiral of discrimination, exclusion and forced removal that facilitated the Holocaust.130 First, economic antisemitism affected the methods devised by the Nazi state to discriminate and exclude Jews from German society. Discrimination often commenced by targeting Jews in their perceived capacity as owners of businesses or property. Organised boycotts of Jewish businesses started on 1 April 1933, only two months after Hitler had been appointed Chancellor.131 One other early measure introduced by the Nazi government was a retail licensing law. This was used to limit, at first, the creation of new Jewish businesses in this sector, and increasingly, to oversee the forced sale of Jewish businesses to ‘Aryan’ Germans.132 Special taxes and currency regulations were also stringently applied to Jews seeking emigration. In April 1938,

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all Jewish property was centrally registered as a preparation for discriminatory taxation and eventual confiscation ‘to take necessary measures to ensure the deployment of property in accordance with the needs of the German economy’.133 A ‘Punitive Tax’ was levied on Jewish property after the Kristallnacht only eight months later, and Jews were forbidden from participating in most entrepreneurial activities.134 In 1939, bank accounts owned by Jews were blocked by the state Currency Office. The final confiscation of Jewish property was carried out in conjunction with the mass deportation of Jews from Germany to the death camps in 1941.135 Moreover, economic antisemitism eased the acceptance of policies that destroyed Jewish economic life among ordinary Germans and it increased their willingness to collaborate with state organs in this endeavour. In fact, many measures to restrict Jewish commercial activity during the early years of the Third Reich were not decreed centrally in Berlin, but were the result of ‘spontaneous’ actions by local Nazi Party officials, stormtroopers, private businesses or even ordinary consumers.136 For example, many companies started dismissing their Jewish employees in 1933, although no such demand had been issued by the German authorities.137 After the annexation of Austria in 1938, wild looting of Jewish businesses in Vienna encouraged central authorities in Germany to take a more forceful and structured approach to Jewish expropriation.138 Other measures, such as the persistent ‘boycotts’ of Jewish businesses, could not have been effective without mass participation by consumers. Although partly steered from above, they built on popular narratives of grassroots consumer action. These actions were effective in the sense that the total number of Jewish businesses in Germany declined by 60 per cent between 1933 and 1938. This happened despite the concurrent economic recovery and despite the fact that comprehensive measures to confiscate or liquidate Jewish assets were not introduced until the end of that period. The effectiveness of these ‘boycotts’ speaks volumes about the extent of economic antisemitism in 1930s Germany.139 Once Jewish businesses were forced to close, the acceptance of discriminatory measures was further heightened by the fact that some Germans directly profited from Jewish economic exclusion, either because it removed a commercial competitor, or because they themselves became the beneficiaries of plundered Jewish assets.140 Even Jews fortunate enough to escape the Nazis through emigration were therefore not left unscathed. Many had been forced to sell their property at throwaway prices after boycotts or administrative restrictions. Others faced taxes and capital controls, which tightly limited the amount of capital that Jews could transfer abroad. This sharply reduced their ability to emigrate from Germany.141 One of the few ways out of this trap was provided by the Haavara (transfer) agreement, which Zionist representatives negotiated with the Nazi leadership in 1933. Until the outbreak of the war, Haavara effectively allowed German Jews to transfer capital to British-held Palestine and emigrate,

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as long as Jewish businesses in Palestine reciprocated these capital exports with orders for German export goods. This arrangement provided the chance for 50,000 Jews to escape with their life, and a significant part of their private capital, to Palestine.142

5.4 Economic Nation-Building in Palestine When Jewish refugees from Europe arrived on the shores of the eastern Mediterranean in the interwar period, they encountered there a dynamically developing economy. In British-controlled Palestine, Zionist activists and planners strove, through the management of land, labour and product markets, to construct something that had not existed in Europe: a separate Jewish economy. They hoped that this economy would provide a path to the realisation of Jewish statehood. The political economy of interwar Palestine is important for understanding economic nationalism because we can detect here, with some marked differences, an echo of the patterns of economic nation-building already observed among the stateless nations of prewar central Europe (Section 4.3).143 Moreover, the Zionist movement shows how nationalists in the interwar period navigated flexibly between alliances with land-owning capitalists and socialist labourers in furthering their economic aims. The protection of ‘Hebrew Labour’ became one of the main rallying cries of Zionism, partly because high wages were necessary to maintain a settler population. In addition, Zionists such as Arthur Ruppin (1876–1943) mobilised ‘National Capital’ to purchase land for settlement. The protection of Jewish workers and land, in turn, increased the likelihood of conflict between Jews and Arabs in Palestine. *

Modern Zionism originated in Central Europe with the publication of Theodor Herzl’s Der Judenstaat in 1896. Herzl (1860–1904), a well-travelled Viennese journalist, foresaw an intensifying wave of antisemitism across Europe.144 Jewish attempts to assimilate with their ‘host societies’ were futile, Herzl warned.145 Only the establishment of a separate Jewish state, preferably in Palestine, could provide a way out.146 Jews were not merely coreligionists, but one nation (‘ein Volk’).147 In this respect, Herzl’s Zionism was not too dissimilar from other fin-de-siècle political nationalisms rocking the Austro-Hungarian Empire, like those of the Czechs or Poles. It too posited the existence of a separate nation and saw its fulfilment in statehood.148 In other aspects, Zionism was quite different. Herzl realised that statehood in Palestine would require the backing of a great power, preferably the Ottomans, willing to provide a legal charter authorising

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Palestinian settlement.149 Herzl’s Zionism also paid close attention to the economic challenges inherent in settling large numbers of Jews in a land whose existing Jewish population was of negligible size.150 In fact, Der Judenstaat commences with an impassioned plea for the economic viability of an independent Jewish state.151 Herzl believed that land purchases and settlement would provide opportunities for investment by Jewish financiers.152 Moreover, Jews were not just the bankers of antisemitic myth, Herzl wrote indignantly, but also producers and labourers. It was ‘under the banner of labour that the Jews will go to the new land’.153 In ringing prose, Herzl projects that ‘we shall at last live as free men on our own soil’.154 Herzl was a gifted organiser, who founded and built the Zionist Organisation (ZO) to put his plan for a Jewish homeland into practice. With branch organisations and membership around the world, the ZO was a truly global nationalist organisation.155 Yet despite this impressive growth, Zionism remained a minority movement within most Jewish communities. Most jarringly, the large-scale financial backing from Jewish bankers and investors that Herzl had counted on was not forthcoming.156 To those practical men of business holding the purse strings at Rothschild’s, the idea of financing Jewish nation-building in one of the poorest parts of the Middle-East seemed quite outlandish. The French Baron Edmond de Rothschild did run some isolated grape and citrus plantations in Ottoman Palestine, but these were philanthropic endeavours for the benefit of displaced Russian Jews. They were never envisaged as pioneer settlements for Zionist mass migration. Moreover, the Rothschild plantations were deeply in the red, and the Baron gladly parted with them in 1900. They were subsequently to be run on private business principles.157 Far from being the financial superpower the Nazis would later imagine it to be, global Zionism was run on a shoestring, and initially, out of Herzl’s apartment in Vienna.158 Politically, the scene did not look brighter. The Ottoman Sultan showed little inclination to part with his land for the benefit of a group of adventurers.159 However, many Zionists were becoming impatient and were unwilling to wait for the Sultan to change his mind. This was largely due to the precarious situation of Jews in the Russian Empire, where pogroms such as the deadly riots in Kishinev (1903) called for an urgent response. The practical work of settlement, many Zionists argued, should begin immediately. In fact, the gradual erosion of Ottoman sovereignty at the time offered an opportunity for the increasing penetration of Palestine even without official approval. The ensuing wave of immigration into Palestine, known as the Second Aliyah (‘ascent to Jerusalem’) involved mostly young Jews eager to escape antisemitism in the Russian Empire.160 Yet the Promised Land proved inhospitable. Living conditions were dire and malaria was rampant. Most pressingly, unemployment loomed large. There

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was little hope of finding work within the rural Arab economy, which consisted mostly of fellahin engaged in subsistence farming. Arab urban trades were foreclosed by cultural and language barriers. The only sector employing Jews were the former Rothschild plantations, now generally privatised under (Russian) Jewish proprietors.161 Manual work on grape plantations tied in well with Herzl’s call to settle under ‘the banner of labour’. Brought up in seething pre-revolutionary Russia, most Jewish workers were indeed wellorganised and committed to both Zionism and socialism. Their party, Hapoel Hatzair (‘The Young Worker’) promoted the ‘Conquest of Labour’ with fervour. Yet despite Herzl’s hopes, the young migrants proved inexperienced at farm work. Matters were made worse by their ambitious wage demands, which exceeded those of Arab fellahin with whom they directly competed for work on the plantations.162 Riled by this competition, the ‘Conquest of Labour’ was taken more literally and the Hebrew Labour movement campaigned strongly for the exclusive employment of Jews on Jewish plantations. The labour struggle, declared Yitzhak Ben-Zvi (1884–1963), one of the most prominent labour leaders, had become a national struggle by 1913: ‘as long as employers from among our people contracted, explicitly or implicitly, with the fellahin and the natives to reject and restrict the Jewish worker, as long as we are employment seekers even within the Jewish economy, we cannot enact international solidarity’.163 Clearly, nation came before class, and a policy of ‘national protection’ was required to limit Arab employment in the plantations and win ‘the struggle for the future of the Jewish proletariat’.164 The major problem facing Zionist labour activists, however, was that they did not have a state to effect such restrictions.165 All they could do was appeal to the patriotism of the planters. The planters, while showing some sympathy for the plight of their fellow Jews, were not prepared to sacrifice their bottom line. By necessity, the planters’ nationalism turned out more moderate than that of their Hebrew workers and their view of relations with the Arab communities surrounding their plantations was accordingly more inclusive. In the end, most Jewish workers, facing the choice between redundancy and lowering their wages to those of the fellahin, left Palestine for greener pastures. Zionist nation-building, it seemed, had come to a dead end.166 The deteriorating fortunes of the Jewish labourers in Palestine initiated a period of reorientation within the Zionist Organisation in the decade before World War I. These debates resulted not only in new techniques for settlement, but also in a new vision for a national economy in Palestine. These arguments often reflected the different national and class backgrounds of Zionist activists. Many Russian Zionists, following the narodniki, wanted isolated communal settlements (Section 4.5). This appealed to the socialist branch of the movement and to the remaining agricultural workers in Palestine. It did not solve the question of how penniless workers were supposed to purchase land for settlement.167 Others continued to rely on private

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investment in plantations. This would be more efficient than ragtag communal settlements, and economic efficiency would best serve the national project. Moreover, it was only natural that Jewish capital would over time gravitate towards national ends. This, too, was not convincing to most Zionists – it was exactly the propensity of private planters to put their balance sheets above the needs of the nation that had led to the failure of the ‘Conquest of Labour’ in the first place.168 This trade-off between a closed but poor community and an affluent but more open settlement was just another manifestation of the Nationalist Dilemma, but at the substate level. Clearly, a solution would require a compromise between both goals. After Herzl’s death in 1904, the ZO was head-quartered in Germany. Many of its leading figures were German-speaking Jews, who were the product of German discourses on economics. This inevitably shaped their thinking, and the solutions they proposed for Palestine.169 Moreover, some Zionists were influenced by the nationality conflicts brewing in East-Central Europe at the time. Drawing on the experience of these conflicts, they believed that scattered private plantations would not assert sufficient control over the Holy Land.170 If the problem was similar to that in Europe, it was only logical to import solutions from there too. One strategy, proposed by the economist and sociologist Franz Oppenheimer (1864–1943), was to redistribute land to Jewish immigrants, who would set up a network of cooperatives. As in East-Central Europe, cooperatives would serve the dual aims of circumventing unreliable private capital and fostering cooperation exclusively among Jewish residents.171 Zionists also noted the example of Polish land associations, which had shown how a stateless people could, by acting collectively in an open market, alter the distribution of land in its favour. Still, it was unclear whether such a decentralised solution could achieve results quickly enough to accommodate the projected inflow of Russian migrants to Palestine.172 In the end, much of the breakthrough in Zionist settlement was due to the thought and work of Arthur Ruppin. A native of Germany’s contested eastern territories, Ruppin had completed his doctorate in economics under Gustav von Schmoller and Adolph Wagner. His thought was steeped in German traditions of nationalism, social policy and agrarian settlement. Like his mentors, he attempted to navigate a third way between private capital and socialism (Section 4.2).173 One such way was provided by the Prussian Settlement Commission – the government agency tasked with settling Germans in the eastern provinces by buying up Polish landholdings (Section 4.3). In essence, the Settlement Commission spent public money to purchase plots, which under the guidance of technocrats were turned into ethnically homogeneous agrarian settlements. Ruppin’s expertise soon persuaded the ZO of the Prussian model, and he was sent to Palestine in 1908 to direct Zionist settlement efforts accordingly. Ruppin was realistic enough not to attempt a direct implementation of this single model in Palestine. Over the next decade,

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through practical experimentation, he refined and adapted these Central and Eastern European blueprints. Through his numerous writings, he also shaped the emerging Zionist consensus at the ZO in Berlin.174 In the end, British support for the Zionist movement proved pivotal. On 2 November 1917, the British government issued the Balfour Declaration (coauthored by Leo Amery), which committed it to facilitate ‘the establishment in Palestine of a national home for the Jewish people’. Six weeks later, British forces evicted the Ottomans and occupied Jerusalem, in effect paving the way for British control of Palestine for the next thirty years, first by military occupation, and from 1922 on through a League of Nations Mandate. The moment was now auspicious for Zionist settlement.175 By this point, the consensus Ruppin had helped to foster had matured into a coherent set of ideas for a Jewish economy in Palestine. These found expression in the resolutions of the Zionist Conference of July 1920 in London, as well as in Ruppin’s Der Aufbau des Landes Israel (‘Building the Land of Israel’, 1919). As these prefigure Zionist economic policy in interwar Palestine, it is worth examining them in some detail.176 At the heart of the new Zionist consensus lay the affirmation of agriculture. This made business sense – grape and orange cultivation in Palestine had a clear comparative advantage – but other reasons were weightier. Agriculture continued Herzl’s old yearning to regenerate a supposedly intellectual people through manual labour and attachment to the soil. Fostering an indigenous food-producing sector would also enable the Jewish economy to be selfsufficient from the surrounding Arab economy. This did not imply complete rural isolation. Ruppin, whose Wagnerian imprint is clear here, envisaged an occupational structure not unlike that of contemporary France, with about 50 per cent of the population connected to farming.177 Few Zionists doubted that some degree of ruralisation was necessary: the future creation of a Jewish state was predicated on a sufficiently large Jewish population and an extensive control of land. Only rural settlement could ensure both the absorption of immigrants and their wide distribution over the territory of Palestine. In this sense, the commercial potential of land was of secondary importance, what mattered was its national value.178 As national considerations of land trumped commercial ones, Zionists needed to revise their basic philosophy of settlement. True, his enterprises in Palestine had been making losses, admitted Ruppin. But they were not a failure, because ‘colonisation is not a business enterprise, which only counts commercial assets, that is to say those with a market value’. What mattered was the creation of assets with a long-term benefit to the Jewish people: the construction of durable settlements with a ‘strong communal spirit’.179 This, of course, was precisely List’s old distinction between immediate marketable value and long-term ‘productive power’. A national endeavour could not rely on bean-counting plantation owners, but needed a guiding hand. On this basis,

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Zionists developed their attitude towards capital. Instead of private investments, ‘National Capital’ would be collected as contributions from Jews worldwide. This would be overseen by the ZO.180 In Ruppin’s words, profits would not matter, because ‘the financial basis for colonisation must be laid . . . by the entire Jewish people, in the clear knowledge that the use of these funds will be governed by considerations regarding their greatest possible utility for the construction of the Jewish community in Palestine, and not the profit motives of their donors’.181 The ZO, as the steward of this ‘National Capital’ in Palestine would dispense with it in two ways. First, it would provide aid to migrants, wage subsidies to agricultural workers and credit to agricultural enterprises. Wage subsidies would help to tilt the balance in Palestine’s labour markets towards Jewish workers, without burdening their employers with additional costs.182 Second, and most importantly, ‘National Capital’ would be used to acquire land. This land was to be held as the ‘inalienable property of the Jewish people’ (Ruppin) and was by statute not marketable.183 In effect, this provision ensured that land markets in Palestine would only operate unidirectionally. The ZO and its associated bodies would purchase Arab landholdings on the open market, but once purchased, these holdings would be taken out of commercial circulation and remain in ‘national’ possession. They could be rented out on the basis of hereditary leases, but only to Jewish tenants.184 This public land also held the key to solving the vexed issue of Hebrew labour. This was essential to most Zionists, who held that the ‘national’ character of a settlement was not only determined by the ownership of land, but also by the nationality of its tillers.185 Ruppin’s pioneering insight was to lease public ZO-land to the destitute Jewish agricultural labourers who would form cooperative or communal settlements. As a national endeavour, rents were far below market rates and the set-up costs of the settlements were usually heavily subsidised by the ZO.186 One such settlement type was the iconic Kibbutz, the first of which was founded by Ruppin and a handful of workers near the Sea of Galilee in 1909. As an economic model, Ruppin thus married the Prussian approach of public land acquisition to the communes of the Russian narodniki. On a political level, this entailed an alliance of the quasistate of the ZO with the socialist Russian Jews migrating to Palestine.187 It was a marriage of convenience, not passion. Ruppin and many of his colleagues in the ZO continued to harbour doubts about the economic efficiency of communal settlements. But they needed boots on the ground, and these were the ones they had. In the words of David Ben-Gurion (1886–1973), the most formidable leader of labour: ‘the first and foremost of the builders and fighters for the Hebrew renaissance is the Hebrew worker, and everything that brings about his entrenchment . . . simultaneously benefits the nation in general’.188 From the workers’ point of view, the alliance with ‘national capital’ provided them with the means to labour amongst themselves, cutting out both their employers at the plantations and the Arab workers with whom they competed

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there. Ruppin’s settlements were ethnically homogeneous, and free of class conflict.189 Not all of Ruppin’s thinking made it into the consensus of the early 1920s. Whereas many Zionists wanted to maximise the number of migrants to Palestine, Ruppin was also concerned about their ‘quality’. The most jarring passages in his writing, detailing the ‘selection of human material’ (Auslese des Menschenmaterials), veer into eugenics.190 Ruppin had developed racial and social Darwinist theories early in his academic career and like many of his other ideas, these reflected the imprint of contemporary German discourse.191 At the same time, it is important to emphasise that Ruppin’s social Darwinism did not colour his view of Jewish-Arab relations. He never promoted the kind of aggressive ‘nationality struggle’ fashionable among his German mentors. Unlike Adolph Wagner, Ruppin believed that economic segregation was possible without ethnic strife.192 He was the most prominent founder of Brit Shalom, a Jewish society working towards a peaceful binational solution in interwar Palestine.193 Reflecting on the political impacts of his settlements, Ruppin hoped that investments in agricultural technologies would improve the carrying capacity of land to such a degree that intensive cultivation would obviate sectarian competition for land. This would allow for the peaceful coexistence of Jews and Arabs in Palestine.194 On this vital point, Ruppin was wrong. The dynamics of the economic system which he helped create played a large part in the deterioration of intercommunal relations. The exclusion of Arab agricultural labour clearly provoked hostility, but land policies were more important. The purchase of landholdings from Arab notables for exclusive settlement by Jewish immigrants generally led to the eviction of any Arab fellahin previously living on the land as tenants.195 The resulting cases of hardship were quickly picked up by Arab activists and journalists. Zionist land purchases had therefore already become a salient issue in Arab public opinion even before the Balfour Declaration.196 By the early 1920s, the Arab press regularly ran stories about dispossessed fellahin.197 By the 1930s, concerns over dispossession had become a decisive factor in the formation of Palestinian Arab nationalism. Given the salience of rural questions, the Arab movement adopted the traditional chequered headgear of the fellahin, the kaffiyya, as its symbol. Both Arab nationalists and Zionists now saw rural relations as the main locus of conflict.198 To some degree, national conflict and economic segregation became selfreinforcing. National tensions decreased the willingness of Jewish planters to employ Arab labourers, who could now be depicted as a security risk to the plantations. Incentives to segregate therefore increased in the private sector too.199 During most of the interwar period, Palestine was essentially constituted of two separate economies, Jewish and Arab.200 National strife was not, of course, exclusively determined by economic factors and economic forces could also occasionally work against conflict. Differing patterns of

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specialisation between the communities, partially driven by differences in education and capital abundance, provided an incentive for intercommunal trade. Indeed, such product trade remained robust until the late 1930s.201 Both economies grew rapidly during the interwar period, despite festering tensions. Nonetheless, growth was faster in the Jewish sector, driven by immigration and the associated private capital imports.202 The effect of immigration and private capital imports on the evolution of the conflict is worth exploring briefly. One of the reasons for the Zionist reliance on ‘National Capital’ was the purchase of land for exclusive settlement. Therefore, an increase in private capital inflows could potentially have counteracted segregation. In fact, Zionists were sometimes compelled to encourage private investment in rural and (increasingly) in urban assets. Ruppin believed that completely stifling private initiative would only serve to discourage immigration by well-to-do Jews, which would not be in the national interest.203 Yet Ruppin and other Zionists continued to worry about the tendency of private capital to renege from the national cause. Private investors might sell their acquired plots, leading to the ‘infiltration of the colony by undesirable elements’. One solution was to contractually oblige investors to grant Jewish authorities a right of first refusal on land sales.204 In other instances, the ZO would grant aid to employers who toed the national line (for example, if they employed Hebrew labourers). In this way ‘National Capital’ could be used by Zionist public bodies to incentivise national behaviour by private actors.205 Immigration, of course, directly fuelled competition for land. However, starting in the mid-1920s, Jewish immigrants were less likely to be rural socialist workers from Russia (which was increasingly cordoned off). Many participants in the Fourth Aliyah (1924–1929) were petit-bourgeois Polish Jews; the Fifth Aliyah were predominantly those fleeing Nazi Germany. The latter were mainly middle-class urbanites, and through the Haavara agreement, they came with a portion of their wealth (Section 5.3). Both types of migrants were less willing to settle in an egalitarian rural kibbutz. This tilted the structure of the Jewish economy further towards urban trades, that is, away from the locus of rural conflict. In urban industries, ethnically exclusive employment was in fact not the norm, thus potentially diffusing tensions.206 At the same time, the increasing weight of the urban sector meant that Zionists were re-evaluating its ideological importance. Among those who now started to criticise Ruppin’s agrarian ethos was the economist David Horowitz (1899–1979). In 1935, Horowitz argued that a rapid development of industry could absorb a much higher number of migrants than rural kibbutzim. In other words, industry would now be more useful to the national project. Labour leaders such as David Ben Gurion, who vowed ‘to establish large industrial enterprises of the labourers, in their ownership, with their means and their efforts’, were quick to realise the shifting mood.207 Zionist trade unions started to set up their own industrial enterprises – exclusively with Hebrew labour – or

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threatened industrial action if private employers did not draw level.208 In parallel, Zionist activists set their sight on urban consumption. This gave rise to efforts by some ZO affiliates and municipal authorities to encourage the purchase of Jewish products. In tune with the concurrent ‘Buy Empire’ movement, this involved both positive advertising campaigns, as well as the exertion of social and contractual pressure on retailers not selling enough ‘national’ products.209 Unsurprisingly, Arab nationalists engaged in similar campaigns. This undermined inter-communal product trade, one of the few remaining economic links between Jews and Arabs.210 By 1936, tensions had reached a fever pitch. The Arab Revolt of 1936–39 was directed against Jewish immigration and Zionist land purchases, as well as against the perceived British facilitation thereof. The British subsequently peddled back, and attempted to restrain both Jewish immigration and land sales to Jews. Yet the concurrent persecution of Jews in Europe meant that Zionist leaders could not assent to migration restrictions. Arab representatives, on their part, demanded a complete stop of new entries. There was little common ground left and the British Peel Commission in 1937 recommended the partition of Palestine into separate national states. Economic segregation now had its political approval.211

5.5 Fighting for Industry: China’s Nationalists at War The late nineteenth century has captured the historical imagination as the ‘Age of Empire’, but the overseas empires and spheres of influence created by Europeans, Americans and Japanese did not disappear when the guns fell silent on the scorched battle fields of Europe in 1918. There was, for sure, a redistribution of the spoils at the start of the interwar period. The colonies of the defeated Central Powers were handed over to the victorious British, French and Japanese. The war and Britain’s inauspicious return to gold also hastened the displacement of British exports in Latin America by American products and in many Asian markets by Japanese outputs. Yet as much as the flag on a merchant ship or a governor’s mansion might change, it was still a foreign flag. Viewed from the docks of colonial Africa and India, or from the warehouses of a foreign-controlled treaty port in China, very little had changed.212 Yet it was exactly this enduring control by foreign powers that spurred the growth of powerful anti-colonial movements. In the Chinese case, the ‘foreign’ treaty ports became the wellspring of modern Chinese nationalism. Through their interaction with the outside world at these ports, Chinese intellectuals formed their perception of China’s place within the global economy.213 During the interwar period, this crystallised into utopian programmes for Chinese development, outlined by trailblazing visionaries like Sun Yat-sen, the leader of China’s embattled republican revolution of 1911. He envisaged a China that,

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while staunchly nationalist and protective of its domestic industry, would send its goods to markets across the world and welcome foreign capital. Much of Chinese development strategy in the twentieth century, albeit with staggering twists and turns, can be traced back to Sun’s blueprint. It is therefore central to understanding modern Chinese economic nationalism. Moreover, examining Sun’s interwar legacy carries a lesson that resonates beyond China, because it elucidates the relationship between war and economic nationalism. For much of the twists and turns to which Sun’s vision has been subjected since his death in 1925 stem from the effects of armed conflict.214 On a basic level, war encouraged Chinese economic isolation. Imperialist wars had created the treaty port system and the privileged position of foreign traders who ‘opened up’ China. In response, Chinese intellectuals called for a boycott of foreign goods. Impending conflict also aided demands from the armed forces for self-sufficiency in strategic industries, especially during the 1930s. Moreover, wartime disruption, especially during the Second SinoJapanese War (1937–45), isolated the Chinese economy from outside trade. Reflecting this war-time isolation, the outward-looking elements of Sun’s plan were discarded under the leadership of Chiang Kai-shek (1887–1975) in favour of the inward-looking development models that would dominate Taiwan until the late 1950s, and mainland China until the late 1970s.215 On the other hand, armed conflict often blocked the capacity of the Chinese government to implement nationalist policies. The demands for resources from the military establishment put a brake on funds that the Republic could have spent on supporting native industries. Tariffs could be crafted to protect civilian industries, or to yield revenue for armaments, but they could not do both effectively. In the end, military needs often triumphed over civilian industry.216 Wars therefore not only modify nationalist ideologies, but also modify the execution of their economic programmes. Finally, the Chinese case opens a new window on the transmission of economic ideas. In Europe, the Americas and most colonial territories, ideas were transmitted through the diffusion of written texts. Indian and Turkish nationalists, such as Ranade or Gökalp, could discuss economic liberalism and nationalism on the basis of the texts composed by J. S. Mill and Friedrich List. In contrast, Western political economy, be it liberal, nationalist or Marxist, only diffused slowly in China, where the barriers to translation and cultural transmission were higher. The first widely circulated translation of Adam Smith’s Wealth of Nations was not published in China until 1902, List followed in the mid-1920s, and key texts of Marxist theory were not available until the 1930s (well after Mao Zedong composed some of his major works). This does not mean that Chinese intellectuals were isolated from foreign ideas. Rather, they long observed foreign actions before they read foreign words. British maritime supremacy demonstrated the importance of an assertive trade policy, US manufacturing prowess the advantage of protected industry, and Japan’s

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success at arms the utility of a cohesive nationalist polity.217 Moreover, for them to gain acceptance, foreign ideas had to be interpreted within received systems of economic thought.218 *

The most influential body of Chinese thought was doubtless the Confucian tradition, the orthodoxy of the fading Qing dynasty (1644–1912). Drawing on the Confucian classics, Qing bureaucrats saw their realm as a self-sufficient agrarian civilisation. It was to be a world unto itself, where trade only had a marginal role to play. The Qing were not ‘protectionist’ in a modern sense. Rather, amassing riches – and this included profits from long-distance trade – was seen as detrimental to moral growth. The same aversion extended to the accumulation of wealth by the state. Government was to tread lightly and taxes levied sparingly. Although imperial authorities had some role to play in managing grain surpluses, officials were to lead through force of moral example, rather than regulation.219 Although this harmonious ideal was always threatened by domestic crises within China, it was most rudely shattered by the assertive European states who showed little inhibition to grow rich. Craving access to Chinese markets for opium and manufactures, Britain struck the first blow in 1842 when its superior navy forced the Qing to open five treaty ports to foreign trade, sign over Hong Kong, and assent to a fixed import tariff. The Qing also ceded jurisdiction over British merchants active in China to British consuls, similar to the privileges of extraterritoriality enjoyed by foreign traders in the Ottoman Empire (Section 4.5).220 The outcome of this First Opium War led some intrepid minds to call for change. Among these was Wei Yuan (1794–1857), who pioneered one of the first Chinese investigations into the origins of western dominance. Relying on scattered written and oral sources, as well as his observation of British actions during the war, Wei deduced that taxing maritime commerce was the wellspring of British power. Commerce, in turn, was supported by state monopolies and military power: ‘soldiers and trade are mutually dependent’, Wei concluded.221 He therefore called for a strengthening of the moribund Qing navy and a revitalisation of external trade. His recommendations, to a limited extent, echoed Western state practice, but Wei fell short of fully endorsing such amoral and un-Confucian behaviour.222 Nevertheless, his conclusions came perilously close to those of the Confucians’ intellectual rivals: the Legalists. Scholars in this tradition had stressed the interdependence between the ‘wealth and power’ (fuqiang) of states, and exhorted rulers to mind both through a system of monopolies and regulations. During the nineteenth century, ‘wealth and power’ gradually became a slogan for reformist elements within the Qing realm, thus bringing about a renaissance of this indigenous mercantilist tradition of thought. However, in the 1840s, Wei was still a peripheral

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voice in China. His works were eventually published in Japan, where Meiji leaders would explicitly adopt the ‘wealth and power’ slogan as their motto (Section 4.5). Yet in Qing China, even Wei’s modest proposals went too far for the conservative authorities. The First Opium War was mainly fought on the coastal periphery of the Qing realm and it did not seem to threaten the core of their state.223 The Second Opium War (1856–60) hit closer home, occupying the dynastic capital of Beijing after heavy fighting. The resulting peace further extended the treaty port system. More treaty concessions and territorial losses followed after the conclusion of the Sino-French War in 1885, and most painfully, after the Sino-Japanese War of 1895. Finally, an international coalition of the United States, Japan and six European powers decisively defeated desperate Chinese resistance during the Boxer Rebellion (1900–01), imposing a heavy silver indemnity and the stationing of foreign troops on the disintegrating dynasty. After each defeat, new mercantilist fuqiang reforms were proposed by ‘loyal’ scholar-officials, attenuated and belatedly adopted by the Qing authorities, only to be obviated by the next military debacle. The succession of defeats called for a more radical revision of China’s political economy than could be provided by a simple strengthening of state control. This was offered by nationalism.224 Zheng Guanying (1842–1922) might be described as China’s first economic nationalist. His influence was notable at the time – he left his mark on several Qing reform programmes – but his real significance comes through two of his readers: Sun Yat-sen and Mao Zedong. Despite this legacy, Zheng himself was hardly a revolutionary firebrand, instead working as a merchant and agent (comprador) for Western companies.225 During his business dealings in the treaty ports, he witnessed the competitive disadvantage under which Chinese merchants operated. Zheng backed up his observations with reference to customs statistics, which demonstrated that China’s trade balance had been in deficit since records began in 1864. This trade deficit quickly became a fixation among Chinese intellectuals such as Zheng, for whom it constituted prima facie evidence of a ‘drain’ of profits to foreigners. Similar complaints had been made by Dadabhai Naoroji in colonial India (Section 4.4). Zheng and his followers, however, tended to interpret trade as a zero-sum game. They did not regard imports as having any economic value (for example as an input into production or final consumption). In reflection of his martial age, Zheng also did not see the trade deficit as the outcome of market forces. Instead, Chinese merchants were fighting and losing a ‘commercial war’ with the West: unequal treaties made for unequal trade. Foreign privileges, Zheng charged, were the reason China was being swamped with cheap foreign imports. Similar to Wei, Zheng’s experiences led him to conclude that the origin of Western supremacy lay in fuqiang: Western merchants triumphed because they were supported by Western guns. However, writing freshly after the Sino-French War, Zheng

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went further than Wei and expressly designed a strategy of ‘wealth and power’ to best the foreigners.226 Zheng’s strategy, perhaps unsurprisingly given his background, put the needs of merchants front and centre. Chinese traders required active assistance from the state to compete at home and abroad: monopolies, tariffs and naval support. Industrial policy, mainly state subsidies, would revive traditional exports, such as silk. His thrust was decidedly outward-oriented, and although some of his proposals had a mercantilist ring, others sound surprisingly modern. For example, he proposed that foreign investors would help to equip Chinese industry in ‘multinational public business zones’ on the coast. Moreover, Zheng went beyond traditional thought in calling for a unified national market, looking to abolish the various internal tariffs that hampered domestic trade. Most importantly, Zheng exalted nationalism as the glue to bind the Chinese people together in competition with the commercial foe: ‘The reason why China is poor and weak whereas the West is rich and strong lies in their different social customs – the familism of China and the nationalism of the West.’227 Zheng Guanying gathered around him a small circle of scholars who shared his views. The observation that Western states were both wealthy and expansionist easily led to the reasoning that these qualities were causally related. This is the essential reason why early economic nationalism in China was so strongly outward-oriented. Chinese nationalists shared this orientation with their Japanese counterparts, so that Zheng and his compatriots naturally looked to the Meiji state as a source of inspiration. Back in China, however, their quest for the creation of a nation-state was incompatible with Confucian orthodoxy and the dynastic Qing realm. As the realm would not change from above, as it had done in Japan, the logical next step was revolution. Zheng himself was not willing to take this step, but Sun Yat-sen, one of his young protégés, was.228 Sun was part of a new generation of Chinese nationalists, whose exposure to the outside world stemmed from their visits abroad, rather than from the experience at the treaty ports. Sun’s early studies had led him to Hawaii and British Hong Kong, before his opposition to the Qing led to a protracted exile in Europe, the United States, South-East Asia and Japan. On his travels, he produced a constant stream of nationalist pamphlets, as well as crafting a network of organisational and financial support among overseas Chinese. This network formed the backbone of the underground societies that catapulted Sun to power as the first president of the new Republic of China after the 1911 Revolution.229 Yet neither Sun’s powers of prose, which we will examine shortly, nor expatriate money alone adequately explain how concerns such as those of Zheng and Sun about trade deficits and unprotected merchants could command popular backing. After all, the vast majority of Chinese had little contact with foreigners, or even with their goods, until well into the interwar period.

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The imports coming through the treaty ports scarcely penetrated the rural markets catering to three hundred million Chinese peasants in the interior. Foreign ownership was dominant in the industrial sector, but this sector was dwarfed by the immense size of the rural subsistence economy. And unlike Latin American countries such as Brazil or Argentina, China’s agricultural economy did not depend on major export crops. As much as Zheng and Sun might have dreamt of China as a trading powerhouse, this was utopia even after 1911.230 The factor that did mobilise the masses (though clearly not all of them) was perceived aggression by foreign powers. A first round of spontaneous protests targeted the United States in response to the extension of the Chinese Exclusion Act in 1904, which discriminated against Chinese immigrants. Most subsequent protests were reactions against Japanese encroachment: Japanese grandstanding after a minor naval incident in 1908, complete Japanese takeover of the Manchurian railway in 1909, and Japanese demands for special economic rights and a say in Chinese government in 1915.231 Outrage over these incidents culminated in a widespread wave of protests against the territorial gains made by Japan in China after the Treaty of Versailles in 1919. These protests all followed the same pattern. ‘Humiliation’ at the hands of an outside power and a weak response by the Chinese government convinced radicalised students to take matters into their own hands. Lacking an effective weapon with which to retaliate, they turned to organising boycotts of foreign (usually Japanese) products, shops and banks. Students policed the execution of the boycott, confiscating and burning foreign wares. Very rapidly, these boycotts ceased to be a tool for punishing a hostile power and became a movement to encourage the consumption of Chinese products. After all, was not the very existence of foreign imports and enterprises a threat to the Chinese nation, just as Zheng and others had written? Zheng’s ‘commercial war’ now became the duty not just of patriotic merchants jostling against imports in Shanghai’s warehouses, but the duty of every single consumer across the country. As ‘commercial war’ took to the streets of China, battle lines were drawn within communities. In scenes foreshadowing those of the Cultural Revolution forty years later, consumers buying foreign goods were publicly denounced as traitors, traders dealing with the commercial enemy were displayed in cages in front of raging mobs and sometimes murdered.232 The students enforcing the boycotts received logistic assistance from native merchants’ organisations who attempted to steer the boycotts to their advantage. Under the motto ‘business enterprises rescue the nation’ they propagated the use of ‘national products’ as a means to revive Chinese production (and their own purses). The trade collapse during World War I had helped Chinese merchants to capture some domestic markets and this had increased their resources for political activism. As the boycott movement became institutionalised and extended across the country, the merchants’ role in it expanded. By

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the start of the 1920s, the ‘national product’ movement had effectively normalised the notion that Chinese citizens were to consume Chinese products, work for Chinese bosses, and deposit their money with Chinese banks. In light of these results, the ‘national product’ movement can be compared to Gandhi’s Swadeshi campaigns in India, from which it did indeed draw inspiration. Yet the Chinese boycotts were different in that they were never captured by a single nationalist party. In contrast, the grassroots activism of these movements set out the terms of reference which any future nationalist party had to follow. It was a nationalism that was more intensely xenophobic and more fixated on battling imports than Zheng’s expansionist project of a Chinese trading nation had been.233 Zheng had promoted import restrictions, but his notion of a ‘commercial war’ had also involved battling for China’s market share abroad. Expansionist nationalism did receive some intellectual backing from economists who had received their education in the West and who started to draw on List’s thought in the 1920s. Eventually, some of these Listians – such as Ma Yinchu (1882–1982), a graduate of Yale and Columbia – would rise to prominence in interwar China and even attain prestigious academic positions under the Communists in the 1950s. But List’s thought did not ‘create’ Chinese expansionist nationalism, it merely reinforced the foundations laid by Chinese pioneers such as Zheng.234 And in terms of popular mobilisation, it was opposition to foreign imperialism and the isolationist ‘national products’ movements that were more important than either Zheng or List. In a country that had little in the way of a national party system, these movements affected the context in which leaders such as Sun Yat-sen could formulate their ideas. Sun summarised his core beliefs as the Three Principles of the People: nationalism, democracy and economic welfare.235 His writings on the Three Principles evolved through the ups and downs of his chequered political career. ‘Nationalism’ was at first concerned with toppling the enfeebled Qing dynasty. Yet the accomplishment of this feat in the winter of 1911/12 brought little solace to Sun. After his brief tenure as China’s inaugural president, the young republic splintered into the fiefs of competing warlords. Essentially, Sun and his Kuomintang (‘Nationalist’) Party became one of these warring factions, reduced to controlling a chunk of territory in China’s south. In the 1920s, in a bid to unify these factions, Sun redefined ‘nationalism’ as resistance to foreign imperialism, the most popular policy platform available.236 In the final version of the Three Principles, delivered as a series of lectures just a year before his death in 1925, Sun accordingly emphasised his antiimperialist pedigree in line with the popular ‘national products’ movements. China was a country of ‘slaves’, worse off than a colony, Sun charged. In a world of predators, ‘other nations hold the knife and the dish, whereas we are the fish and the meat’.237 Reiterating his mentor Zheng, he argued that the treaties were to blame: extraterritoriality implied that the profits of foreign firms in China were ‘losses’ to the nation. Foreign banks squeezed Chinese

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debtors and repatriated profits.238 Imperialist control of the Chinese tariff system had yielded an ‘invasion of foreign goods’ producing a trade deficit that represented an ‘immense leakage’ abroad.239 Abrogating the hated treaties to ‘follow the protective policy of the United States and Germany’ was the only salvation.240 Sun laid on the language of ‘commercial war’ thickly: ‘Just as forts are built at the harbors to prevent foreign military invasion, so also there should be a protective tariff boycotting foreign goods by means of Customs Duties. This makes possible the development of national industries.’241 Yet Sun was also realistic enough to recognise the limitations of an isolationist development strategy. He noted that ‘in China there are no great capitalists in the real sense of the word’, meaning that industrialisation would be ‘very slow’. Hence the ‘need of borrowing both men and capital from the foreigners’. With a gift for the dialectic that puts Deng Xiaoping in the shade, he concluded that ‘we shall make use of the existing foreign capital in order to bring about the communistic world of future China’.242 This spirit of openness was not accidental. In The International Development of China (1920), maybe Sun’s most innovative work, he presented a detailed blueprint of China as an industrial superpower. Using dozens of maps and technical drawings, he sketched a Chinese landscape dotted with mines, factories and modern cities, all linked together by a dense network of railways and riverine transport. A mega-dam on the Yangtse would provide electricity to a booming economy. Chinese colonists would cultivate Mongolia, Tibet and Xinjiang, drawing these peripheral regions into the national economy. From there, trunk lines would link the Chinese west to the remainder of Eurasia. In the east, gigantic ports would link maritime China with the outside world, and ship the products of a rejuvenated porcelain, tea and silk industry to customers worldwide.243 Sun was frank that ‘in this national undertaking, foreign capital has to be invited, foreign experts and organizers have to be enlisted, and gigantic methods have to be adopted’.244 Moreover, foreign capital was to receive the first cut of any profits. And again, there would be a socialism with Chinese characteristics: ‘It is my idea to make capitalism create socialism in China.’245 Reading The International Development of China in the twenty-first century, one is struck by its quality that is at once naively utopian but also realistically prophetic. Utopian because China in 1920 was far removed from being a wellintegrated industrial powerhouse. Prophetic because it anticipated some elements of the developmental aspirations of post-1978 governments (Section 7.3). Given the latter quality, it is no coincidence that the modern Chinese leadership publicly appraises its own economic record against Sun’s blueprint.246 But the spirit of openness in Development of China does sit uneasily with some of the ferocious anti-imperialism and protectionism in the Three Principles. Such contradictions have puzzled many commentators on Sun Yat-sen. Clearly, shifting political demands played a role. Sometimes, Sun needed to cater to

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‘national product’ sentiment, at other times he wanted to secure support from foreign backers.247 Yet seen from a comparative perspective, Sun’s predicament was hardly novel. He faced the same dilemma most economic nationalists face. How was one to square the demand for independence with the need for development? And the answer Sun provided was hardly confused: the state would act as a safeguard of both. Tariffs would regulate, not shut out, trade. Foreigners would invest in projects managed by the state. While paying expatriate capital handsomely for its services, the state would also have the power to protect the vulnerable Chinese people from external exploitation. As he explained with regards to the fruits of foreign investment: ‘the property thus created will be state owned and will be managed for the benefit of the whole nation’.248 Moreover, Sun believed that nationalism itself would act as a talisman. Drawing on Zheng, Sun outlined how he could ‘save the country by employing the national spirit’. Without it, the Chinese people would be ‘loose sand’, destined for ‘extinction’. Therefore, ‘Japan is a good example for us to follow if we desire the greatness of China’.249 But Sun’s plans were not a cookie cutter imitation of the Meiji state. In his most penetrating insight, Sun reflected on the imperialist wars over China. Was not such war, ultimately, to the detriment of both Chinese and foreigners? China was weak and its weakness invited further squabbling among the great powers.250 Furthermore, the boycotts had shown that if foreign capitalists disregarded ‘the will of the Chinese people’, their profits dissipated. A cooperating China, on the other hand, would be a profitable outlet for the capital of the rich world.251 Most importantly, a strong China would cease to be a bone of contention for the great powers. Development and openness would solve the problem of war, Sun declared, adding that ‘I desire to have China organised for peace’.252 As Sun was writing these words, his country was still torn apart by civil war. Although he did not bequeath peace, Sun left his followers a political testament that enshrined, among others, the Three Principles and Development of China as the official creed of the Kuomintang Party. Chiang Kai-shek, the KMT’s military strongman, pledged allegiance to this creed, but quickly opted for war to carry it out. After a series of military campaigns (1926–28) he reined in most of China’s warlords, imposing a semblance of unified government on the wartorn country. Chiang’s success at arms created a state potentially capable of realising Sun’s policy.253 Chiang’s new government acted on its nationalist instincts. It abolished internal trade taxes, attempting to create a unified Chinese market. Crucially, it moved quickly to reclaim sovereignty over tariffs. This long-standing nationalist aim was achieved after negotiations with the treaty powers (United States, Britain and Japan) between 1928 and 1930. This feat was not only due to Chinese diplomacy, but also the result of popular pressure from the boycott movements. As expected given its Sunist pedigree, the Nationalist government

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quickly increased tariff rates, much to the delight of local industrialists. The main target of the tariffs, especially pleasing to anti-imperialist sentiment, were Japanese imports, whose share in Chinese markets had been expanding rapidly due to the depreciation of the yen.254 However, Chiang Kai-shek’s attempt to curry favour with popular antiimperialism ended in ignominy. In the early days of their government, the Kuomintang threw their weight behind the ‘national product’ movements. An official ‘National Products Code’ in 1928 regulated the minimum share of Chinese raw materials, labour and capital used in the manufacture of a product for it to be labelled a ‘national product’. Chiang also patronised the gigantic National Product Exhibition in Shanghai in the same year, exhorting his compatriots to ‘use national products to destroy imperialism’.255 Faithful to their leader’s sentiment, local KMT-cadres supported boycott actions, preferably against the Japanese, whose invasion of Manchuria in 1931 further inflamed nationalist passions. However, the raucous boycott movement quickly became impossible to control. When Chinese protesters seized Japanese goods and clashed with Japanese citizens in Shanghai, Japan had a pretext for military retaliation. In January 1932, planes from an aircraft carrier of the Imperial Japanese Navy carpeted China’s commercial capital with bombs, while Japanese marines moved in to secure the city. Despite fierce resistance by Chiang’s elite corps, Shanghai’s defenders were outgunned and defeated. Chiang was forced to yield to Japanese demands, and the shaky truce his government signed committed the KMT to suppress the popular boycott movement. Although his awareness of China’s military vulnerability may have forced Chiang’s hand, appeasement did not endear him to the nationalist cause.256 Even traditional infant industry protection (and any prospect of alliance between the KMT and Chinese industrialists) was hampered at vital stages by military weakness. As the Depression of the 1930s wore on, some local industrialists pressed for prohibitive tariffs that would choke off competing imports. Popular nationalist opinion was on their side. However, the threat of war put a damper on self-sufficiency. After the Shanghai War, Japanese military superiority was obvious and Chiang Kai-shek was anxious to avoid further confrontation. He quickly yielded to Japanese pressure over tariffs, sacked his protectionist finance minister in 1933 and lowered duties on Japanese goods. As one senior Nationalist remarked on Chiang’s record on protection, he had ‘made a great show of being earnest, but in the end amounted merely to empty words’.257 Ironically, even Chiang’s own military at times lobbied against protection. The threat of war with Japan, as well as campaigns against insurgent warlords and Communists in the interior, created an insatiable demand for funds. As the government’s control over much of its territory was tenuous, it could not systematically tax the bulk of its population. It did, however, control the ports

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on the eastern seaboard and could therefore fall back on taxing maritime trade. However, if tariffs were protective in the sense of curtailing imports, they would yield little revenue, thus exacerbating fiscal shortfalls. And while the military did have a vested interest in a domestic steel industry, it cared little for the protection of Chinese manufacturers of cigarettes or silk dresses. When faced with the choice between designing a tariff that was protective of civilian industries or one that raised revenue for military expenditure, Chiang’s government generally chose the latter.258 The chronic lack of funds also made itself felt in the tentative industrial policy pursued by the Nationalist government. There was, for sure, some intent to move in the direction chartered by Sun. The government invested in infrastructure (especially roads and electrification), promoted urban planning and sponsored the rejuvenation of silk manufacturing. As Sun had stressed, industrial renewal proceeded under international auspices, in this case with technical assistance from the League of Nations.259 In practice, however, military demands for funds often stymied efforts at industrialisation. Instead of subsidising industry, Chiang was increasingly forced to tax businesses heavily. Added to official taxes were various informal ‘levies’ extorted from businesses by rapacious local officials. Corruption was so pervasive that KMTcadres even traded with the Japanese enemy.260 In any case, it was industrialisation out of military considerations that was the lodestar of the KMT. The government expanded technical education, giving rise to a well-trained cadre of Chinese engineers by the late 1930s. The government tightened regulation of industry, founded state-owned enterprises and put in place planning bodies staffed by engineers and scientists. The technocratic ethos owed much to the aid the KMT received from Germany and fascist Italy (see next Section). As the Japanese threat mounted, planning was directed towards constructing an autonomous ‘national defence economy’, based on heavy industry located in the interior.261 It is nonetheless fair to say that, in the mid-1930s, the Chinese government retained some commitment to Sun’s blueprint. The most isolationist impulses stemming from the national products movement had been blunted (ironically by Japanese intervention), moderate tariffs had been introduced, steps towards internal market unification taken, and industrial policy was on the agenda, even if haphazardly employed. The Great Depression was hardly an auspicious moment for an export-push strategy, and there was reason to hope for an upswing in the global business cycle by 1936. At this point, war once again intervened – and pivoted the Chinese economy fully towards selfsufficiency.262 The outbreak of the Sino-Japanese War in 1937 rapidly overwhelmed China’s defences. Within a year, the Nationalists had lost the coast, their main source of trade (and tax revenue). Their armies were pushed back to Sichuan in the country’s south-west, where Chiang established a new industrial

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base to equip his armies. Surrounded by mountains, Sichuan was a defensive stronghold, but it was also extremely isolated. During much of the war the only link with China’s American allies was the air route over the Himalayas – hardly an appealing route for trade. In response, the Nationalists constructed their ‘national defence economy’ mostly on local resources. This defence economy was dominated by state-owned heavy industry, operating according to a rigid plan managed by engineers and economic bureaucrats. The overriding need for war-time mobilisation expanded this state-run military sector at the expense of private and civilian production.263 A militarisation of the economy was of course common among all belligerents in a war that consumed men and materiel like none before. What distinguished Chiang and his bureaucrats from other war-time planners is that they expected self-sufficiency to persist in peace time. The Nationalist plans for postwar China featured exactly the same state-run defence economy for the whole country as they had built in isolated Sichuan.264 This ideological turn is visible in Chiang Kai-shek’s wartime writings. In two works published in 1943, China’s Destiny and Chinese Economic Theory, Chiang narrated the long history of humiliations China had endured at the hands of the imperialists.265 Unlike Sun, who wanted to embed China’s security in a framework of multilateral cooperation after World War I, Chiang focused on defence through national self-reliance. This could not be achieved through individualistic economics, Chiang argued, but only by dissolving the individual into the nation-society.266 Although Chiang approvingly noted Friedrich List and Othmar Spann (Section 5.3), he posited that ‘traditional’ Chinese economic theory offered the high road to such a society. It would foster a disciplined workforce, dutifully labouring for the creation of state-run industry.267 This did not mean that Sun Yat-sen’s ambitious blueprints were forgotten. Chiang praised Sun, by then a figure of legendary proportions, on almost every page. However, he blanked out Sun’s openness to foreign capital and his focus on exports. The experience of war had accelerated the inward turn of Chinese nationalism. Chiang Kai-shek was not the only Chinese leader who was making plans for a future China based on self-sufficiency. Chiang’s early accommodation of Japanese economic demands, the rapacious administration of the KMT and wartime cooperation with ‘imperialist’ America left a void that his rival Mao Zedong (1893–1976) stepped in to fill. Mao did this by incorporating economic nationalism into the programme of the Chinese Communist Party (CCP). While it may seem counter-intuitive that a Marxist party would openly embrace these ideas, we will see that this constellation was not unusual among socialists in developing countries (Section 6.3). Mao claimed – much to the dismay of his Soviet advisers – that the overriding need for economic development required one to compromise on Marxist orthodoxy. In the late 1930s, Mao therefore placed the CCP in the tradition of Sun Yat-sen, declaring

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from italy to romania to brazil: mihail manoilescu’s dictators 163 that the Party would follow a ‘thorough-going application of the Principle of Nationalism’. Sun’s revolution, Mao posited, was a necessary step towards socialism, simply because it was opposed to imperialism. Imperialism, defined by Mao as ‘international capitalism’, was the real enemy: ‘[T]he contradiction between imperialism and the Chinese nation is the principal one.’268 National capitalism, on the other hand, had a constructive role to play in China’s development, according to Mao. Given China’s weak position, the proletariat needed to unite with the peasants and the bourgeoisie to ‘solve the problem of the destiny of the Chinese nation’.269 It was ‘absolutely necessary’, Mao emphasised, to have ‘a prudent policy toward the national bourgeoisie’, which itself had historically been oppressed by imperialism and was therefore now a ‘revolutionary force’.270 The Kuomintang, he claimed, had betrayed Sun’s revolution by dealing with the imperialists and for failing to defend even the interests of the national bourgeoisie.271 The ensuing civil war, which erupted in full force once the Japanese had been defeated, now pitted two factions against each other who both claimed the mantle of Sun Yat-sen and who both propagated ‘anti-imperialism’ and inward-focused development. After 1949, they would pursue their national visions in two separate Chinas – that of Mao Zedong on the mainland (Section 7.3) and that of Chiang Kai-shek on his island refuge of Taiwan (Section 6.4).272 Both would struggle to maintain self-sufficiency and growth at the same time.

5.6 From Italy to Romania to Brazil: Mihail Manoilescu’s Dictators The dilemma of combining an inward orientation with a desire for rapid development is starkly visible in interwar southern Europe and Latin America. In these peripheries of the world economy, the interwar crises accentuated efforts to close the persistent gap in industrial capacity with the north Atlantic economies. Although these efforts partly reflected Listian traditions of development thinking, doctrine ultimately went beyond List’s rather circumspect stance. At a fundamental level, this new doctrine stressed that improved domestic productivity and efficiency would close the developmental gap even if economies were isolated from the world economy. Four implications were deduced from this principle. First, it provided a novel justification for protectionist measures that shifted resources from agriculture into more productive industrial ventures. Second, it gave rise to strong beliefs in the merits of technocratic administration, which would use scientific planning to direct resources towards their optimal domestic use. Third, the maxim of economic efficiency was extended to society at large: only the streamlined organisation of social forces in corporatist systems would unlock the productive potential of the nation. Encrusted oligarchic elites and unruly workers alike needed to be pressed into the service of development. Finally, at its most

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extreme, the maxim of efficiency required a reshaping of government. A preference was given to autocratic and personalised systems of rule, where the dictator would transcend class-based interests and serve as the incubator of development. In reality, these autocratic regimes often acted in concert with domestic industrial interests. These patterns can be observed, with due variation, in Italy, Romania and Brazil. This similarity partly reflects the ‘peripheral’ status of these economies. Structurally, they remained predominantly agricultural well into the interwar period. This could not easily be blamed on imperialism, as Chinese nationalists had done. All three countries were long-established sovereign states by World War I. Brazil’s independence from Portuguese colonial rule dates to 1822, while Italy and Romania had attained unification and independence (processes that were linked in both cases) by the 1870s. Yet statehood had not brought the desired level of economic development. This was often depicted as a failure of economic liberalism in Brazil and Italy, where classical policy recipes had been followed. In Romania, where elites had already pursued Listian strategies of tariff protection, it could be interpreted as a failure of moderate economic nationalism. In addition to international income disparities, nationalists also worried about domestic cleavages. Pockets of industry had started to appear in all three countries, but the profits thereof seemed to be limited to a small group of elites. Similarly, political power did not seem to rotate beyond these narrow circles, despite nominal democratisation. The failure of development was therefore also viewed as a failure of democracy, in addition to being a failure of economic doctrine. As a result, intellectuals promoted both radical economic nationalism and dictatorship. The shared experiences of Italy, Romania and Brazil are also due to common intellectual influences. Corporatism evolved first in Italy, in equal measure a reaction to macroeconomic crises as it was an expression of a wish to overcome Italy’s mediocre status as a ‘Proletarian Nation’. However, the economic principles of Benito Mussolini’s Fascists were contested between collectivists and individualists, and his regime scarcely mounted a cogent developmental policy. Nonetheless, Italian corporatism and its productivist rhetoric inspired the Romanian economist and politician Mihail Manoilescu, who was to justify political reform at home with the need to transcend inequities in international exchange. Besides his influence in Romania itself, Manoilescu’s ideology of autocratic development became an important source of ideas for the dictators of the interwar period. His ideas became particularly influential in Brazil under the Estado Novo of Getúlio Vargas (1882–1954). It was here that Manoilescu’s thought was granted an unusually long afterlife, eventually feeding into the discourses of unequal exchange and underdevelopment that resounded throughout postwar Latin America.

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5.6.1 Italy: Collectivists and Individualists On the surface, conditions in Italy were just right for the emergence of developmental nationalism. The nationalist movements of the midnineteenth century had crafted a state out of linguistically and economically disparate regions. No historical survey of nationalism is complete without at least a passing reference to the quote by the statesman Massimo D’Azeglio who put the ‘making of Italians’ at the top of the agenda for the newly made state.273 There was indeed much to make. Growth remained sluggish, with industrialisation scarcely making an impact before the turn of the twentieth century. When industry spread, it did so unevenly and remaining largely confined to the north-west of the peninsula.274 Moreover, a significant part of the investments in the industrial north were undertaken by German financiers, leaving assets in banking, engineering and electricity generation potentially under the control of foreigners. This worried some Italian nationalists. Yet it was the limits imposed by underdevelopment upon Italy’s capacity to project power abroad that was their prime concern. By the end of World War I, this weakness had become plain. Italy’s performance in the war was costly in terms of men and materiel, but the spoils accorded to the country by its powerful allies at the Paris peace negotiations were mediocre.275 Italy thus had an active nationalist movement, whose members were acutely aware of the country’s weak economic base. They at times resented the influence of foreign commercial interests. Nonetheless, economic nationalism was of marginal importance until the early 1930s. In academia as well as in policy, liberal economic thinking long remained dominant, despite the theories of List and the German Historical School being known in Italy. The Italian rejection of nationalist ideas on the economy sprang from three sources. First, these ideas were commonly associated not with economic growth, but with government control. In a country where government intervention was a byword for inefficiency and redistributive politics, rather than collective welfare, this was lethal criticism. In a similar vein, List and the historical economists were not seen as propounding a sound scientific doctrine, but as providing a screen for interest group politics. As the leading liberal economist Luigi Einaudi declared in 1921: ‘I will continue not to study and not to mention Wagner, Schmoller and Sombart, not because they are German, but because, in my opinion, they wrote things of little importance and of low quality.’276 Despite Enaudi’s protestations, anti-German sentiment did matter. The firmest opposition to economic nationalist thinking pointed specifically to its German roots, branding it polemically as germanismo economico, an ‘economic Germanism’ that was peculiar to those living north of the Alps. Until Mussolini’s alliance with Germany smoothed relations between both countries in the 1930s, such a charge stuck. ‘German’ Austria had been the main adversary in the Italian Wars of Independence and in World War I. The

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activity of German banks in northern Italy has already been noted.277 One may briefly recall that a similar conflation of List and German entrepreneurial penetration had inhibited the wider spread of his thought in Tsarist Russia (Section 4.5). Both cases underscore how simple economic factors such as ‘economic backwardness’ do not suffice to explain local trajectories in thought and policy. Rather, the transfer of thought from abroad, and its interaction with local intellectual traditions and political institutions, is essential. The writings of Maffeo Pantaleoni (1857–1924), the ‘prince’ of Italian economists, illustrates well how Italian nationalists remained wedded to liberal ideas. Pantaleoni believed in individual autonomy and opposed any government restrictions in the form of tariffs, price fixing or regulations that could impede the workings of a free market. At the same time, he was a fanatical Fascist supporter. He reconciled his economic individualism with his fascist convictions because he believed that Fascism would break through the encrusted structures of the Italian democratic state, with its politics of favouritism and redistribution, to usher in an era of free and unfettered competition. Pantaleoni even took it unto himself to publicly admonish Mussolini, after all the founder of Fascism, for seemingly swaying from the principles of ‘true’ fascism: individualism, market efficiency and the uncompromising battle against rent-seekers and socialists.278 Fascism was many things to many people. While Pantaleoni’s individualism reflected in extremis the position of some liberal Italian economists in the early 1920s, others celebrated Mussolini’s rising party for the opposite reason: its supposed collectivism. Among these, the syndicalists, a socialist group with revolutionary aspirations, stand out. In the second decade of the twentieth century, the syndicalists had moved to an increasingly ‘national’ reading of Marx. Their principal innovation was to transform the Marxist concept of class conflict into one of international conflict. The national syndicalists could then argue that advanced ‘plutocratic’ nations such as England or Germany exploited a poor ‘proletarian’ nation such as Italy. Class struggle should therefore be avoided in favour of a struggle between nations for resources and power.279 This premise was picked up by Alfredo Rocco (1875–1935), who agreed with the syndicalists that underdevelopment required an effort by the national collective. Yet Rocco realised that if one required a national theory of productive forces, List was a more fruitful source than Marx (Section 3.4).280 Extrapolating from List’s theory of productive powers, he reasoned that productivity was the engine of world history. Some nations had unlocked superior levels of productivity through optimal social organisation. These nations would expand and dominate, whereas others would perish. The key was therefore to find the proper social system that would marshal the nation’s productive forces.281 Democracy and individualism (two concepts Rocco conflates) were not helpful in this endeavour, as they led to labour conflict,

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from italy to romania to brazil: mihail manoilescu’s dictators 167 interest group politics and the redistribution of a shrinking pie. Instead, the focus should be on growing the pie. Rocco believed that a corporatist state could accomplish this endeavour by directing the bourgeoisie to its historical role, which was production.282 He did not envision corporatism to be a backward-looking system, like that of the German Romantics. Rather, the state would set objective standards for entrepreneurs, rewarding output with membership in a ‘productive aristocracy’. Workers would be compensated for stagnant wages in the short run through ample incomes in the future.283 In Rocco’s thought, we find the germ of interwar theories of autocratic development. It has Listian origins, for sure, but its focus on social organisation, autocracy and technocratic management sets it apart. Although its collectivism is in stark contrast to the individualism of Pantaleoni, there are important points of overlap. Both shared a distaste for the ‘inefficiencies’ of Italian democracy as well as an aversion to class conflict. A further commonality was a stress on technocracy. Whereas for the collectivist Rocco, technocracy worked at the national level, liberals strove to implement technocratic management solutions at the enterprise level. Drawing on Taylorist theories from the United States, they emphasised objective standards, close supervision of workers, and top-down management as key drivers of productivity growth within the firm.284 What united both camps in 1920s Italy was a yearning for autocracy, social peace and productivity, broadly defined. These ideas, in particular the thought of Alfredo Rocco, exerted much influence on Mussolini.285 Mussolini was not one to let an opportunity for political gain to pass by, and he saw the potential of produttovismo as a concept of broad appeal. It could bridge the gap between individualists and collectivists. Mussolini’s movement proclaimed to be, as expressed in the byline of its newspaper after 1918, one of ‘combatants and producers’. This sounded assertive and vaguely modernising. It was also broad enough to include common soldiers and workers. Until the war, Mussolini had been a dedicated socialist and he remembered that workers were also producers. At least he now retained a nominal commitment to cherish the forces of production.286 Generality and vagueness, coated with ample propagandistic veneer, remained the hallmark of Mussolini’s approach to economics after his ascension to office in 1922. This reflected his fundamental lack of interest in the subject, his belief in the primacy of political ‘will’, but also the diversity of views that supported him. He therefore continued to cater to both individualist and collectivist strands of thought.287 For the first decade the regime’s economic policy was oriented towards market efficiency. Policy was handed over to technocratic experts, including Pantaleoni. Alberto De Stefani (1879–1969), a prominent liberal economist, was made Minister of Finance. Government spending on ‘unproductive’ items (including the military!) was cut to balance the budget. Public enterprises were privatised, welfare payments to veterans

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cut and the bureaucracy streamlined. Credit growth was curtailed in an attempt to rein in inflation. The regime remained fundamentally well disposed towards foreign (especially American) direct investment and responsive to financial market sentiment.288 Mussolini’s most notable foray into economic policy was his commitment in 1926 to peg the currency at ninety lire to the pound sterling, a rate that made it strongly overvalued. Mussolini made much propagandistic bombast of this ‘Battle of the Lira’, but the move simply brought about a strong deflation, decreasing wages and making Italian enterprises internationally uncompetitive. In fact, its effect was not too dissimilar from Britain’s return to gold as executed by Churchill (Section 5.2). There was nothing exceptionally developmental or nationalist about these policies, and ‘orthodoxy’ or ‘austerity’ would be better descriptors.289 Given Italy’s liberal tradition of economic thought, the pursuit of these policies is unsurprising. When Mussolini’s regime did implement barriers to trade or foreign capital, these were often not the results of a strategic plan for autarky or development, but a reaction to circumstances. Facing an overvalued lira, Italy’s increasingly uncompetitive enterprises lobbied for protection, and received it.290 When Fiat felt threatened by American investment in car manufacturing, the firm interceded with Mussolini personally, and was successful.291 Only once Italy became subject to international sanctions following its attack on Ethiopia was the regime forced to pursue a concerted policy of autarky through import substitution. This was in 1936, a full fourteen years after the Fascists had ‘marched’ on Rome.292 The principal sector in which the regime did follow a deliberate policy of autarky from an early date was grain cultivation. Starting in 1925, the regime imposed tariffs on wheat and encouraged self-sufficiency in food. As with Hitler’s agrarianism, the main objective was preparation for war (Section 5.3). Unlike his colleague north of the Alps, however, Mussolini was slow to recognise the deeper industrial transformations required for modern warfare.293 Despite the initially open policy stance pursued by the regime, the collectivists were not left out in the cold. Alfredo Rocco remained influential. He joined Mussolini’s cabinet in 1925 as Minister for Justice, although he clearly had little influence on economic policy from that position.294 Other thinkers, such as Gino Arias (1879–1940) continued to develop corporatism into a fully fledged doctrine, stressing its ability to overcome individual egotism and assure an appropriate balance between capital and labour. Efficient coordination would also privilege national production over international exchange. Order and organisation remained important, and these slogans formed an essential part of the regime’s image. Institutional reforms, especially those limiting the power of labour, were therefore given a corporatist guise.295 A ‘National Council of Corporations’ was founded in 1930 as a supreme body of constitutional rank by Mussolini. On the occasion of its founding, the dictator stressed the principle of purposeful order: ‘The National Council of Corporations represents, in the

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from italy to romania to brazil: mihail manoilescu’s dictators 169 Italian economy, that which the headquarter-staff represents in armies, that is, the thinking brain which prepares and co-ordinates.’296 On the same occasion, Mussolini explained verbosely how corporatism squared the circle between individualism and collectivism: ‘fascist syndicalism, through class collaboration, flows into the corporation, which has the task of rendering such collaboration systematic and harmonious. It safeguards property while at the same time raising it to a social function; it respects individual initiative, though within the ambit of the life and the economy of the nation’.297 Under the impact of the Great Depression, the stability promised by corporatism lent it an increasing appeal, so that the doctrine became popular in the early 1930s. Corporatism morphed into a particular Italian form of economic nationalism; an attempt to create well-ordered economic communities in pursuit of the national goal of production.298 With the benefit of hindsight one can easily see through Mussolini’s thinly applied varnish of modernisation and order. But at the time – at least until the mid-1930s – the regime held transnational appeal. Italy was seen as a dynamically resurgent great power that thwarted the supremacy of the British Empire in the Mediterranean. The government put ample resources into exporting fascism as a political doctrine abroad. The German Nazi Party imitated the tactics and style of the Italian model from an early stage.299 Likewise, many foreign economists did not see Italian corporatism as a sclerotic system repressing the working classes, but as a progressive answer to both underdevelopment and crisis. It was therefore highly influential in the ‘southern’ periphery. Mussolini made sure to encourage the global dissemination of this creed, and met personally with sympathetic economists, such as Mihail Manoilescu and Werner Sombart. Both were quickly taken in by the Duce’s efforts and by Italy’s ‘modernising’ appeal. Especially Manoilescu would dedicate much of his life to the development and spread of Italian corporatist ideas. The twentieth century, Manoilescu declared confidently, would be the ‘century of corporatism’.300

5.6.2 Romania: International trade and Corporatism Manoilescu modelled his corporatist writings on Italian patterns, but he also embedded these within an advanced framework of economic theory. This framework reflected Romanian traditions of thinking on (under)development and international exchange. Since the 1880s, Romanian policymakers had explicitly been following List’s prescriptions by promoting domestic industry through tariff barriers (Section 4.3). This had aided the rise of an industrial bourgeoisie. Together with large landowners they formed the elite of the Romanian state. Many members of this elite, both industrialists and landowners, could trace their roots back to the aristocratic Bojars. As late as the 1860s, these Bojars had, through systems of slavery and serfdom, ruled over

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a peasantry producing cereals for export. Cereals continued to be the prime export despite inceptive industrialisation.301 In the decade before World War I, cereals were partly replaced by a quintessentially modern export: oil. State-of -the-art refineries, drilling wells and transport equipment were built by affiliates of Anglo-Dutch Shell and American Standard Oil with the help of German banks. This foreign investment created a technologically advanced exclave within a still largely agrarian economy. Spill-over effects from ‘foreign’ oil to Romanian manufacturing were minimal, however, and domestic industry grew slowly.302 The juxtaposition of a destitute peasantry, sluggish industrialisation and an ultra-modern resource sector called for a recasting of List’s analysis. What was holding back development? Romanian economists were in the position to provide answers. The country boasted a well-developed system of universities, staffed by graduates from leading European economics departments. This was similar to Italy. Yet the intellectual environment was profoundly different. Given the Listian legacy, a national conception of economics remained the starting point for Romanian economists. Ethnic questions mattered as well. The Paris Peace Treaties had enlarged Romania with the addition of Transylvania, thus creating a profoundly multi-ethnic country. Transylvania had been the scene of one of the fiercest prewar nationality conflicts and the region experienced continuing discord between Romanians, Germans, Hungarians and Jews in the interwar period. This reinforced a fixation on issues surrounding nationality in Romanian intellectual circles.303 Underdevelopment was sometimes directly attributed to Romania’s ethnic minorities. Ştefan Zeletin (1882–1934), who had studied economics in Berlin and Paris, drew heavily on Sombart in analysing the role of the Romanian bourgeoisie. The bourgeoisie, according to Zeletin, had a historical role to fulfil as vanguard of development. Listian protectionism had been a first step on this road. The national bourgeoisie, however, was hamstrung by enemies: foreign corporations, international finance capital, and predictably, the Jews. Only a strict policy of ethnic segregation and national isolation would limit the economic role of ‘foreign’ interests and enhance the bourgeoisie’s productive capacity.304 Others saw the international environment as the decisive barrier to development. Alexandru Xenopol (1847–1920), a polymath from Moldavia, had turned to Henry Carey’s work. Carey had written about the British ‘monopolisation’ of world prices in the 1850s, and Xenopol similarly believed that exporters of manufacturing products possessed the market power to keep prices high, whereas agricultural exports suffered. Nonetheless, Xenopol remained sanguine about the trailblazing function of the state and the national bourgeoisie in overcoming these challenges.305 The bourgeoisie in Romania gladly accepted its exalted role and played it with fervour after the war. Throughout the 1920s, governments of the National

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from italy to romania to brazil: mihail manoilescu’s dictators 171 Liberal Party, the party of industrialists who had earlier implemented Listian protectionism, now drew explicitly on Xenopol and Zeletin. The outcome was a policy of ‘by our own means’. In addition to an extreme tightening of trade controls, a campaign was waged against ‘foreign finance and Jews’. This involved stringent regulations on foreign capital to aid the emergence of a domestic financial sector. Foreign assets were expropriated and distributed to Romanian investors. This struck both the ‘foreign’ oil industry, as well as properties belonging to national minorities. The government also imposed a tax on the use of minority languages in enterprises as well as a quota for the employment of ethnic Romanians in managerial positions.306 Not all Romanian intellectuals supported these measures, with the strongest opposition coming from agrarian socialists. How exactly, they asked, were tariffs on manufacturing helping the peasantry, who represented the majority of the population? The ‘Romanisation’ of industrial assets and white-collar jobs also seemed to serve a small clique of elites. In the context of the largely ornamental democracy of 1920s Romania, with its oligarchic networks of clientelism and corruption, the agrarian critique was not far off the mark.307 Mihail Manoilescu, a young bureaucrat of aristocratic extraction, entered into this field of tension after World War I as a proponent of industrialisation. Yet he became disillusioned with the ‘oligarchic’ National Liberal Party. His training as an engineer left him searching for a rational blue-print for development unbeholden to interest-group politics.308 This quest for technocratic solutions is the thrust behind his work on economics, most notably his Theory of Protection and International Trade (1929). In this work, Manoilescu argued that the building of a national economy should not be left to politicians, but should be placed on a sound theoretical basis: ‘[s]cience will replace empiricism, and general interests, clearly conceived and defined, will replace the disorder of private interests’.309 Friedrich List, Manoilescu admonishes, was a good nationalist, but a poor economist. His recipes for protection were prone to ideological misuse by special interests (one may note that Italian economists had subjected List to the same critique). Manoilescu’s ‘general theory’ would instead provide a scientific solution that could be widely applied.310 Manoilescu commences, like his compatriot Xenopol, with the notion of unequal exchange. Building on Henry Carey, he notes that industry is unequally distributed across the globe. A handful of nations ‘monopolised’ manufacturing and charged high prices for their exports.311 Blending classical Ricardian trade theory with Italian produttovismo, Manoilescu saw the origin of this international inequality in the differing productivities of labour between poor and rich countries. In industry, the international productivity gap was small (the advanced Romanian oil industry may have been as productive as its American counterpart). In agriculture, the chasm was gaping: a Romanian peasant produced far less per man-hour than an American farmer. As a result, poor nations specialising in agriculture were locked into exports with

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a particularly low productivity. They exchanged large quantities of food, containing the equivalent of many hours of work, for a few manufactured goods. Hence the global gap in wage and price levels.312 At the same time, Manoilescu emphasises, developing countries were marked by the existence of large productivity differences between industry and agriculture within a country: the coexistence of modernity and ‘backwardness’ so characteristic of interwar Romania.313 Clearly, there were large gains for poor countries to shift labour from the traditional to the modern sector. Why did this not occur? Manoilescu stressed two factors. He argued that the League of Nations, the ‘free-traders of Geneva’, defended the entrenched status quo and perpetuated international inequality. These institutions reflected the monopoly interests of the rich world.314 However, domestic distortions inhibited transformation as well. Industrialists only looked after their own gain in deciding where to invest, but ‘profit of the capitalist is a superficial thing, national profit is the decisive matter’.315 Manoilescu also dimly speaks of ‘difficulties’ inhibiting entrepreneurs entering into productive activities, and one may speculate that this reflected his experience with the oligarchic businessmen dominating Romanian industry.316 Only decisive state intervention could overcome such daunting barriers to development. Scouring through productivity statistics from around the world, Manoilescu proposed that government technocrats should identify industries with a productivity level above the national average. These chosen industries should be permanently supported with subsidies and prohibitively high tariffs.317 Permanent protection went beyond a Listian defence of infant industries. Manoilescu could advocate such isolation because he believed that his technocratic regulation could unlock unseen productivity advances that would yield an ‘indefinite extension of production’. He held this theory of protection would be most suitable for the nations of the European periphery, but claimed that it could in principle be applied everywhere.318 If implemented by all ‘backward’ nations, Manoilescu dreamed, manufacturing would finally spread beyond its northern confines and a world of largely autarkic industrial economies would be born.319 The Theory of Protection was a work of economic analysis, aimed at an international audience of policymakers. Published during the trough of the Great Depression, when trade barriers were rising, it resonated with the mood of the times. It was reviewed widely in the economics profession, and although its nationalist rhetoric was not universally accepted, it was often seen as an innovative advocacy of protection. It directly attacked the influential theory of Ricardian comparative advantage using statistics and algebra, rather than List’s somewhat discursive approach.320 Moreover, it offered a developmental vision for the ‘South’. List had explicitly rejected the possibility of industry spreading to the ‘torrid zone’. Manoilescu, as he was at pains to emphasise, held out

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from italy to romania to brazil: mihail manoilescu’s dictators 173 a vision for even the smallest and poorest of countries to attain their ‘national right’.321 It was, however, not a complete vision. The Theory of Protection envisages a state capable of smashing through international exploitation and domestic oligarchy, but the form this state should take was not specified. It is here that Manoilescu’s frequent trips to Italy and his close contacts with Mussolini were decisive.322 The result of these trips was a new work, The Century of Corporatism: The Complete and Pure Theory of Corporatism (modesty was not Manoilescu’s strong suit). Published in 1934, it not only systematised Italian theories of corporatism, but also built on work by Othmar Spann and Werner Sombart. Like the latter two, Manoilescu emphasised that corporations should not be simple transmission belts of government fiat. Similar to Alfredo Rocco, he saw corporatism as a collectivist and modernising system.323 Manoilescu cast corporatism against the concurrent crisis of world trade. This crisis, he claimed, was not a simple business cycle, but the product of a structural transformation. The West was crumbling. Separatism in the British Dominions, but especially Gandhi and his Indian nationalists, were characteristic of the uprising against European ‘economic exploitation’. Heavily referencing his previous work, he argued that protection would shift industry to the periphery. Global overproduction of industrial goods was then leading to a fall in manufacturing prices. The challenge was now how to shift resources to industry and spur growth despite global protection and falling prices.324 Corporatism provided the answer, because it put every group in society to work according to their proper function. This was Manoilescu’s solution to the Nationalist Dilemma. It involved ‘not interest groups against national interest, but on the contrary, the submission of all that is particular, to the idea of the nation, which is the final idea’.325 He outlined three mechanisms how corporatism would secure autarky and growth. First, internal organisation would increase the efficiency of productive activities. Efficiency was crucial, as opportunities for extensive growth through territorial acquisitions or exports were limited.326 Second, ‘national solidarity’ would allow for a strict control of foreign trade and capital movements: ‘all external action, even if individual, is framed by the general action of the state and must pass through the state.’327 Despite Manoilescu’s commitment to autonomous corporations, he clearly relied strongly on top-down control. Distrustful of private initiative, he also accused banks of squandering precious foreign currency reserves when engaging in speculative transfers.328 This called, third, for a tight control of the financial sector. Such control would lead to a lowering of interest rates, and the breaking of Gottfried Feder’s ‘interest rate slavery’ (Section 5.3). This would cut production costs and allow industry to produce for smaller markets.329 In Romania, the impact of Manoilescu’s work was notable. He held various economic portfolios in the cabinets of the early 1930s, as well as briefly heading the Central Bank. He subsequently built a career as a political organiser,

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becoming a some-time ally of the autocratic monarch Carol II. In this capacity he influenced the latter’s corporatist turn in the late 1930s. Yet Manoilescu’s positions were also fiercely contested, and the maelstrom of interwar Romanian politics made for a rough ride.330 The political system was shaken by the meteoric rise of the fascist Iron Guard, an agrarian party with rabid antisemitic positions. Through the 1930s, Manoilescu attempted a rapprochement with the fascists, but they were hesitant.331 Manoilescu’s writings, they remarked, were focused on an international audience and had limited applicability to Romania. In particular, Manoilescu had neglected the necessity of ‘ethnic purification’ and glossed over the ‘Jewish question’. Could it be that the economist was a friend of minorities? Manoilescu was at pains to deny this charge and claimed that corporatism would of course play a large role in the ‘Romanisation’ of the economy. He now became a loud voice in the shrill chorus clamouring for the exclusion of Jews and other minorities from economic life. Practically, he worked hard to limit the employment of ethnic minorities in the Transylvanian coal mines that he co-managed.332 Such efforts paid off when Manoilescu succeeded in forging a close relationship with the Iron Guard, spreading much of their totalitarian propaganda in the process. An outstandingly prominent figure, he was made Minister of Foreign Affairs in 1940. In this capacity he steered Romania closer to Fascist Italy and Nazi Germany. Yet he overplayed his hand. Germany, anxious to please its ally Hungary, forced Manoilescu to sign the cession of parts of Transylvania to Romania’s northern neighbour. The Nazi interest in the Romanian rump-state only extended to its oil reserves, which were now extracted to fuel the German war effort. Manoilescu, the champion of oppressed nations, had signed his country over to the most brutal form of economic imperialism: that of Nazi Grossraumwirtschaft. Such treachery was not easily forgiven, and never forgotten. It ended Manoilescu’s career in Romania and he died in a Communist prison ten years later.333 Ironically, the Romanian Communists would themselves pursue an ideology of insulation, forced industrialisation and fear of dependency that corresponded quite closely to Manoilescu’s own ideas.334 Manoilescu’s international writings were nonetheless influential. He did not slate his less palatable ethno-centric outpourings for publication abroad. On the global stage, he appeared as the theorist of ‘scientific’ nationalism. Many of his works were first published in French rather than Romanian, which aided their diffusion. Manoilescu also made sure to build international networks of like-minded intellectuals to spread his word. His international writings therefore had a large impact in the mid-1930s. His Theory of Protection became particularly popular in Spain, and his political writings were patronised by General Francisco Franco’s regime in 1938. They formed a basis for the autarkic policy of the Falange in the 1940s. In Poland, his work was mobilised by local business groups in the country’s industrialisation debates. Manoilescu

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from italy to romania to brazil: mihail manoilescu’s dictators 175 also enjoyed close relations with the fascist Austrian Chancellor Engelbert Dollfuss and in particular with the corporatist dictatorship of António Salazar in Portugal. His Century of Corporatism was read by Salazar, himself an economist, and was used by leading exponents of the Portuguese regime.335 The most salient uptake of Manoilescu’s ideas, however, took place in Portugal’s former colony Brazil.

5.6.3 Brazil: Industry and Interests The transfer of Manoilescu’s thought from the Balkans to Latin America is less surprising when considering the conditions of the interwar Brazilian economy. Brazil was, like most Latin American countries, geared towards the export of primary commodities. In Brazil, this had traditionally been sugar, harvested by slave labour on plantations. While Romania had been the last country in Europe to outlaw serfdom, Brazil was the last country in the western hemisphere to abolish slavery (in 1888). By the turn of the century, slave sugar had been replaced by rubber. After the bust in rubber prices, coffee became the leading export crop. Politics reflected this economic structure. Nominally a democratic republic since 1889, the presidency was circulated by a ‘gentleman’s agreement’ between coffee planters in the two most powerful federal states (one of them being São Paulo). As in Romania, oligarchy coexisted with the beginnings of industrialisation.336 This arose because their political power precluded the coffee planters from being taxed directly, which left tariffs as the only source of government revenue. Although not protectionist in their intent, these tariffs nevertheless aided the formation of local industry in São Paulo. This state rapidly became the most developed in Brazil, its industry standing out starkly amid the surrounding cash crop economy. For this reason, industry was strongly attacked as ‘artificial’ by liberal intellectuals, who saw its existence as the result of fiscal accident rather than economic necessity. In fact, Brazil’s industrialists were not ‘artificial’ but rather existed in close symbiosis with the coffee economy. The import of machinery for industry and the final demand for industrial products relied on high export earnings. These could only be generated by coffee. Many industrialists were therefore closely invested in the facilitation of the coffee trade and many planters backed industrial ventures.337 No matter whether one believed the Brazilian industrialists to be ‘artificial’ or in league with the planter oligarchy, they hardly made for suitable objects of nationalist aspirations. Attempts to introduce List’s ideas in 1904 found no resonance.338 Instead, early economic nationalists in Brazil focused on the protection of primary resources, especially if these were extracted by foreign corporations. Alberto Torres (1865–1917) was one of the first thinkers in this tradition, which would eventually become a dominant strain in Latin American economic nationalism (Section 8.2).339 Torres stressed how the

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export of raw materials had exploited Brazilian workers and deformed its political system. Coffee monoculture coupled with slash-and-burn cash crop production also devastated the Brazilian countryside, leaving vast tracts of the virgin Atlantic forest a desolate wilderness. The environmental and social costs were high, Torres found, but ordinary Brazilians had little to show for it, being ‘at the mercy of prices fixed in foreign market places’. Planters accumulated wealth, whilst mining was largely controlled by foreign interests. Indigenous resources, natural as well as human, needed to be protected from such exploitation. Torres proposed that the state should be freed from its embrace with the planters. The government would then be able to expropriate foreign mining concessions and place high taxes on coffee exports. Interestingly, Torres did not only oppose the planters but also their allies, the ‘foreign devil’ industry. Instead of industrialisation, he advocated agrarian self-sufficiency, envisaging a nation of small farmers unsullied by plantations, factories and commodity exports. Channelling his inner Jeffersonian, Torres projected that independent smallholders would best support the development of a well-organised, modern state.340 Torres wrote before World War I, but his thought gained new traction in the early 1930s. The Great Depression sent both coffee prices and foreign investment into a tailspin. The resulting economic crisis ushered in a revolution that overthrew the morose oligarchic Republic. The revolution was carried by an unstable alliance of junior military officers, disaffected federal states and a diffuse group of modernisers. There was little that united these groups and for the first time in more than a generation, Brazilian politics was in a state of in flux. The modernisers wanted to craft a centralised state cutting through entrenched planter interests and were therefore attracted to Torres’ version of ordem e progresso. However, industrialists feared the implementation of Torresian thought.341 Clearly, industrialists could not stand by idly and allow a new small-holder agrarianism to take hold. Industrial São Paulo, the stronghold of the old regime, attempted a counter-revolutionary revolt in 1932, but this was crushed by the Brazilian military. This meant that the industrialists needed to come to an arrangement with the revolutionary Brazilian national state. Fortunately for them, they found amongst themselves a gifted tribune in the person of Roberto Simonsen (1889–1948). He was, in many ways, a creature of the old oligarchy, serving as the director of a construction company that had built the infrastructure for the coffee trade. Simonsen was also a seasoned lobbyist. Yet he understood that the days of backroom deals were over: revolutionary situations required public persuasion, which in turn required a vision of the future. He therefore looked for a way to connect industry to the project of national modernisation.342 Simonsen’s first line of attack was to distance industry from coffee. Simonsen conceded to the Torresians that commodity price fluctuations on world markets were the cause of the Brazilian boom-and-bust economy. It was

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from italy to romania to brazil: mihail manoilescu’s dictators 177 not sustainable for the fortunes of an emerging power to be tied to the gyrations of a single crop. In fact, he claimed, coffee plantations reflected the humiliating legacy of Portuguese colonisation. It was therefore coffee that was ‘artificial’ in Brazil, not industry. Second, Simonsen argued that there was nothing peculiar about Brazil’s location in the tropics that precluded industrialisation. Specialisation in international trade was not determined for eternity, but could be changed by policy. Adolph Wagner had shown that European countries could shift back to agriculture through tariff protection, Simonsen explained; this implied reversely that tropical countries could use the same mechanism to shift to industry. Finally, Simonsen was heavily influenced by scientific management doctrines from the United States, especially Taylorism. Like Manoilescu, Simonsen was an engineer by training, and he argued that technocratic management, in the factory as well as in society at large, promised efficiency and modernisation.343 Industry, not smallholder agriculture, was therefore best suited to propel Brazil forward. Yet the industrialists’ argumentative master-stroke was the import of Manoilescu’s work. Simonsen and his colleagues commissioned a translation of the Theory of Protection from French into Portuguese on behalf of the São Paulo Chamber of Industries in 1931 and promoted the work heavily. This endeavour was crowned with success, with Manoilescu’s book becoming influential among Brazilian intellectuals.344 There are, as should be clear, qualities in Manoilescu’s thought that aided this transfer. Brazil was, like Romania, a poor country facing formidable obstacles on the road to modernity. Among these were the weak position of agricultural exports in international markets. They also included anti-industrial interests at home. Manoilescu’s work demonstrated how industrialisation was nevertheless possible by relying on the fashionable remedy of increased productivity. These reasons could appeal to manufacturers everywhere, but there are factors specific to Brazil as well. Simonsen’s writings and public speeches are conspicuous for heavily referencing foreign thinkers. He explicitly quoted, among others, List and Wagner in parliamentary debates. On other occasions, he mentioned Schmoller and of course Manoilescu.345 Even by the standards of global nationalism, this was a high degree of deference. Simonsen himself explained this with a lack of local knowledge in Brazil, which had led to a blind following of classical doctrines, explaining that ‘we did not know how to maintain a convenient and continuous orientation in tariff matters’.346 This defence had some merit – unlike Romania, Brazil did not possess a higher education system with a tradition in the social sciences. Industrialist ideas for a national economy therefore needed to be brought in from abroad.347 However, a more convincing reason for their deference to foreign expertise may be sought in the weak political position of São Paulo industrialists after the revolution of 1930. In light of their intimate connection to the old ‘oligarchy’ and the powerful discourse of industrial

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‘artificiality’, any argument coming from their own ranks was bound to be perceived as an expression of special interests. An appeal to scientific authority from abroad, on the other hand, could bolster their case that they spoke in the national interest. They imported not only knowledge, but also legitimacy.348 Here Manoilescu could come in particularly useful. The Romanian economist very explicitly supplied a ‘scientific’ rule for industrialisation that stood above special interests. This helped to shift the parameters of discourse in favour of Simonsen’s programme. Over the 1930s, industry was increasingly seen as a ‘national’ rather than particularistic asset. For example, Getúlio Vargas, the president installed after the Revolution, was a ‘moderniser’ focused on building a centralised state, but initially not a staunch defender of manufacturing interests. Some of his measures had a Torresian slant, including the nationalisation of resource companies and limitations on the number of foreign-born workers enterprises could employ. From the mid-1930s, however, Vargas moved towards a deliberate policy of import substitution industrialisation. Non-tariff barriers, in particular restrictions on foreign exchange transactions, suppressed imports and protected domestic manufacturing. Government Technical Councils funnelled investments into building a mammoth steel plant. This was accompanied by an increasing focus on building a national market through the abolition of internal duties. Manoilescu’s Theory of Protection was marshalled by the regime as a basis for its policies and Vargas’ speeches began to emphasise notions of unequal exchange.349 Of course, Manoilescu claimed not only to stand above special interests, but also above political parties and democracy. This did not work to his detriment in Brazil, especially when Vargas, who had been moving into an authoritarian direction for a few years, suspended the revolutionary constitution and appointed himself dictator of the Estado Novo (New State) in 1937.350 A year later, Manoilescu’s Century of Corporatism appeared in Brazil, translated and prefaced by Antônio de Azevedo Amaral (1881– 1942), a journalist with links to the regime’s propaganda channels. The fame his work on trade had bestowed upon Manoilescu in Brazil now increased the acceptance of his corporatist thought. Amaral accordingly emphasised Manoilescu’s corporatism as a way of removing internal constraints to industrialisation. Economic development would then pave the way towards overcoming international unequal exchange. The fast rate of growth in industrial output during this period seemed to validate Manoilescu’s and Simonsen’s positions, so that the latter became a close ally of the regime. His fellow industrialists, together with economic bureaucrats and the military, constituted Vargas’ main sources of support.351 Autocratic development and corporatism became the professed creed of the Estado Novo, even if, as in the Italian original, there remained a gap between Manoilescu’s ‘pure’ theory and actual practice. The Estado Novo was certainly

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from italy to romania to brazil: mihail manoilescu’s dictators 179 not an omniscient crafter of the national economy, unlike some later eulogies would suggest.352 Like Mussolini, whom Vargas admired greatly, the Estado Novo did not pursue self-sufficiency for its own sake. Many of the regime’s trade barriers were reactions to crisis events. Moreover, like many economic nationalists, Vargas solicited US capital when it proved necessary for the construction of large capacity plants. Even his alliance with business was not rock-solid and he turned to seeking political support from the swelling ranks of the urban workers to shore up his regime.353 But this should not obscure the change in attitudes towards industry during the Vargas years. In 1930, economic nationalism had been a marginal discourse, its most prominent manifestation being Torres’ evocation of the isolationist rural idyll. When the Vargas regime fell in 1945, nationalism, development and industry had become closely intertwined in the Brazilian discourse. This association survived the Estado Novo.354 Politicians who had been active under the Estado Novo, including Vargas himself, successfully stood for elections on expansionist positions in the 1950s. Economic nationalism in Brazil shed its automatic association with autocracy after 1945 and focused on a democratic mobilisation of social forces, but the goal of development remained the same. So did many of the policy tools, because intellectuals continued to elaborate state-led industrialisation strategies.355 The Fundação Getulio Vargas (FGV), founded in 1944, is still active to this day as the principal Brazilian think-tank on economic development.356 Another important vehicle of continuity was the Higher Institute of Brazilian Studies (ISEB), set up as a graduate institute in 1955 to conduct research into the Brazilian economy and to train its economic bureaucrats. Its programme was centred solidly on nationalism, industrial development and economic independence. Many early ISEB-intellectuals had been active in the interwar industrialisation debates and had supported Simonsen and Vargas. Postwar, ISEB enjoyed an intimate relationship with the democratic Brazilian government. Its staff also forged links with the UN Economic Commission for Latin America (ECLA). For example, Celso Furtado (1920– 2004), the most prominent Brazilian representative of ECLA, worked closely with ISEB and the Brazilian government until the early 1960s. As such, Brazil provided a crucial bridge between interwar nationalist thinking and postwar Latin American developmentalism.357

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6 Policy in a World of Nation-States, 1946–1978

6.1 Introduction Economic nationalism in the postwar era was a Janus-faced creation. On the one hand, it was pervasive. National development was the key framework within which economic policy was conceptualised. On the other hand, it was a soft-spoken nationalism, rarely explicitly acknowledged and often camouflaged behind more marketable ideologies, such as liberalism and socialism. Nationalism’s double-faced visage in the postwar era – its pre-eminence and its concealment – are products of the interwar period. First: concealment. The institutions of the postwar world, in particular the United Nations and the Bretton-Woods arrangement, were created in reaction to the nationalism that had reigned in the preceding three decades. Postwar intellectual and political leaders not only associated the war itself with nationalism. Academic studies and policy papers showed how the economic crises of the interwar had been exacerbated by economic nationalism. In fact, the academic study of economic nationalism is largely a product of the 1930s and 1940s, and the tenor was unambiguously negative. Avoiding the mistakes of ‘national egoism’ in economic policy therefore became a maxim of the postwar world. Even if, like all maxims, it was regularly ignored, it had its basis in intuitive experience and it possessed its own normative power.1 Moreover, the most important nationalist theorists of the interwar period had been associated with the defeated Axis, including Werner Sombart, Othmar Spann, the Italian corporatists and Mihail Manoilescu. They had been influential in Latin America and East Asia in the interwar period, but we find little mention of these writers after 1945.2 This is of course unsurprising. Adopting foreign theories had a lot to do with importing legitimacy, and this could not be had by importing the ideas of Nazis, fascists or their collaborators. A similar stigma was extended to older German nationalist writers, such as Friedrich List. This also makes sense. Ideas were powerful because the states that were believed to be their emanations – Bismarck’s Germany, even Mussolini’s Italy – were powerful and, by nationalist measures, successful.

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Axis defeat and economic collapse shattered these illusions and economists turned to new gods. Theorising economic nationalism therefore took place within ideological frameworks that were dominant in the postwar period. Fortunately for policymakers in the Global South, superpower rivalry during the Cold War ensured there were enough to choose from. Populists such as Juan Perón (1895–1974) in Argentina and Gamal Abdel Nasser (1918–70) in Egypt could appeal to the rights of ‘the people’, which chimed well with the widespread adoption of democratic principles after the war (even if this adoption was exceedingly nominal).3 As ‘the people’ for Perón and Nasser were synonymous with ‘the nation’, they nonetheless remained within the orbit of nationalism. In addition, many nationalists in Latin America and Africa embedded their development plans within frameworks of international collaboration, which absolved them from the charge of pursuing ‘national egoism’. Examples include the United Nations Economic Commission for Latin America (ECLA), as well as Pan-Africanism and Pan-Arabism.4 Others turned to socialism, particularly on the African continent. The African Socialism of Kwame Nkrumah (1909– 72) and Julius Nyerere (1922–99) was based on notions of self-reliance, Africanisation and national development. This turn to socialism was strengthened by aid from the Soviet bloc. States in capitalist East Asia, on the other hand, remained committed to the United States. They nominally adhered to the values of free competition and open markets that such an alliance required. Japan, South Korea and Taiwan did indeed become exporting power houses. However, exporting proved to be quite compatible with high barriers to imports and to foreign direct investment, despite the free-market rhetoric.5 Nationalist thought in the postwar era displayed such adaptability because it built on a set of ideas so widespread that they were rarely questioned (at least not officially). This included the sanctity of national sovereignty, the right of previously subjugated peoples to material improvement, and the role of government in spurring such development.6 The breakup of empires created – for the first time in history – a world of nation states (even if this masked important ethnic heterogeneity within many countries, as discussed in Chapter 7). In general, the state’s citizens were the members of the nation and this implied that the state’s economic policy was a ‘national’ policy. There was no need for the grassroots boycotts of yesteryear. The primacy of the nation-state was supported by international organisations, neoclassical economists and sometimes even American foreign policy, all of which advocated import-substitution projects in the 1950s. Even though overt nationalism was passé, Keynes’ lesson that protection, capital controls and an activist state might be required for economic stability and growth had not gone unheeded. This attitude supported the nationalist project.7 This ubiquity of nationalist assumptions also explains the second characteristic of postwar economic nationalism – its pre-eminence. Indeed, much of the

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postwar development discourse was the product of cumulative narrative building over the preceding decades, even if this heritage was not always acknowledged. Perón built on Getúlio Vargas and Benito Mussolini, Raúl Prebisch (1901–86) and ECLA were the heirs of List and Manoilescu, African Socialists built on the Black nationalism of Marcus Garvey (1887– 1940) and W. E. B. Dubois (1868–1963), while Japanese bureaucrats in the 1950s digested their absorption of Sombart and Spann in the 1930s. A final factor heightening the acceptance of nationalist ideas were the multifaceted legacies of imperialism. In countries that had shaken off colonial rule, such as Egypt, Ghana or Tanzania, new governments grew out of independence movements and their economic policy was simply the continuation of anti-colonial struggle. Given persistent international differences in incomes, the most important project for postwar nationalists was development. However, expansionist ideas were tempered by memories of discriminatory colonial trade practices and the dominance of multinational corporations, which made some nationalists unwilling to pursue deep integration into the world economy. This was most pronounced in Egypt and Argentina, countries that had been very closely intertwined with the world economy before the war. In these instances, populist movements blamed skewed domestic wealth distributions on globalisation. Populists therefore sought isolation to cut domestic elites off from the international sources of their wealth. These postwar populists provide an important archetype of economic nationalism, one that would resurface again in the 2000s (Section 8.1).8

6.2 Argentina, Egypt and a Populist Backlash Most of the regimes promoting autocratic development in the 1930s did not survive the world war, but their impact nonetheless proved long-lasting. When Brazil’s dictator Getúlio Vargas rallied the workers in a last-ditch effort to save his faltering Estado Novo in 1945, he was closely watched by an ambitious military officer south of the border: the Argentinian colonel Juan Domingo Perón. Like Vargas, Perón was a professed admirer of Mussolini’s style of modernisation and order, and he shared a preference for top-down policy with both interwar dictators. Yet Vargas’ demise also held out a warning to wouldbe autocrats: regimes which could not count on the support of organised labour or the rural masses had little chance of lasting in a democratising postwar world. Perón’s answer, in one of his most-quoted phrases, was ‘to give the people, especially the workers, all that is possible’. He coupled redistribution to the downtrodden with venomous attacks against the country’s established elites. This style of populist politics proved exportable to several other countries, especially to Egypt, where a group of equally ambitious military officers, of whom Gamal Abdel Nasser would become the most influential, copied Perón’s formula. In both Perón’s Argentina and Nasser’s

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Egypt, redistribution to workers and agitation against traditional ‘oligarchy’ built popular mass movements which – at least temporarily – stabilised the new regimes.9 Populist politics had three important consequences for economic policy. First, although Perón and Nasser did invest in the gradual build-up of education and health systems, their priority was to deliver rapid benefits to their political base. This could be accomplished by rapidly raising wages and employment, which in the last resort relied on an increase in government spending. As populist regimes pretended to ignore macroeconomic constraints in their decision making, they became prone to crises. In the continuation of his above-mentioned quote, Perón posited that ‘everybody will try to frighten you with the spectre of an economic collapse. But this is a lie. There is nothing more elastic than the economy, which everyone fears so much because no one understands it’. Echoing his colleague, Nasser posited that ‘the popular conscience of the people’ mattered, not technocracy. In consequence, both regimes ran up burgeoning budget deficits and faced inflationary pressures that were scarcely contained by a multitude of price controls. These macroeconomic crises eventually precipitated the need for fiscal retrenchment, which in turn undermined the viability of regimes whose very existence was predicated on redistribution. Economic unsustainability was part and parcel of populism.10 The political need for redistribution had a second consequence: neither Perón nor Nasser were ready to demand the ‘sacrifices’ (limited wage growth, long working hours) that expansionist nationalists typically required of their population. To be sure, both regimes stressed accumulation and growth in their public statements, like all postwar governments were prone to do, but these objectives clearly ranked lower than their short-term social goals. This set these regimes apart from developmental forms of nationalism, including Mussolini’s brand of productivism, which exhorted compatriots to work hard for the long term benefit of the collective.11 Instead, populists favoured isolation. This was their third, and most important, economic characteristic. It was partly the result of redistributive policies, which were easier to carry out in a closed economy, where workers and firms with lower productivity could be shielded from international competition. The quest to provide employment also gave an impetus to the nationalisation of (often foreign) firms, whose corporate policy could subsequently be reorientated towards job provision. As we will see, the need to turn inward encouraged Perón and Nasser to flank their economic policy with the appropriate anti-foreign verbiage.12 More fundamentally, isolation was also a direct consequence of populist mobilisation. The domestic elites that were a target of Perón’s and Nasser’s invectives had benefited from their countries’ integration into the world economy. Among these elites were large landowners (cultivators of cotton in

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Egypt, producers of grain and beef in Argentina), who had amassed vast wealth and power from exporting these products during the globalisation of the nineteenth century. Other elites who bore the populist brunt were rising industrialists, who had cooperated with foreign capital. Some had even used the idiom of economic nationalism themselves when lobbying for protection, only to turn to external finance and British contracts when profits beckoned. Exporting landowners and turncoat industrialists were, in the parlance of Eva Perón and other Argentinian nationalists, la oligarquía vendepatria, the oligarchs who had, quite literally, sold their fatherland. An attack on domestic elites simultaneously implied an attack on the foreign trade and finance which were the source of their wealth.13 In their assaults on ‘unnational’ elites, Nasser and Perón frequently made use of the language of the classic anti-colonial nationalisms of India or West Africa. This came most naturally in Egypt, a country whose dismal growth record in the first four decades of the twentieth century coincided with both the veiled and visible types of British occupation. Those Egyptians who profited from trade with British firms could easily be branded collaborationists. The anti-imperial rhetoric used by Argentinian leaders in the first six decades of the twentieth century presents, superficially, a different case. British commercial interests in the country were famously strong, but Argentina did not suffer from colonial occupation and entered into international transactions voluntarily. In fact, Argentinian economic growth, at least until the interwar period, was nothing short of spectacular. Yet populists were not primarily interested in the average level of income, but in its domestic distribution. Both countries’ integration into the world economy depended on the export of rural products, which strongly increased the income of landowners. Buoyant land rents relative to stagnating wages created the same class cleavages in Argentina as in Egypt, even if this occurred at a higher level of income in the former. Social tensions were heightened in both countries by rapid urbanisation. By the first years of the twentieth century, the settlement frontier in the Pampas had been reached and the maximum extent of arable land in the Nile valley had been attained. The capacity for rural areas to absorb labour declined thereafter. With population growth remaining strong, rural-urban migration intensified, swelling the ranks of the un(der)employed precariat in Buenos Aires and Cairo. They provided the support Perón and Nasser could mobilise, both against the elites and against the open economic model that sustained them.14 Needless to say, this widespread sentiment of anti-elitist nationalism did not miraculously appear in the postwar era. It developed, broadly speaking, in three phases, which took place roughly synchronously in Argentina and Egypt. * A first phase of nationalist mobilisation saw the promotion of protectionism by small circles of exporters who were reacting to the collapse of world markets

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for their produce in the 1870s. In Argentina, this was largely a reaction to the sharply increasing protectionism of the United States in the 1860s (Section 2.6). Powerful Argentinian ranchers, who faced slumping sales in their North American markets, demanded a protected internal market as a substitute. They also proposed the domestic refinement of raw materials such as wool under government tutelage. They were joined by industrial pressure groups, which had a long-standing interest in tariff barriers. Together, they waged an aggressive public relations campaign in the press and the halls of the Argentinian Congress. Although their lobbying was clearly an expression of special interests, and dissipated quickly once conditions in world markets picked up again, the early protectionists deployed a wide range of arguments from contemporary nationalist discourse, drawing on Henry Carey and to a lesser extent on Friedrich List. Their reasoning would have a lasting impact on Argentinian discourse, creating an argumentative repertoire that later nationalists could fall back on. First, lobbyists pointed to the employment-creating effects of industrial protection, and cast their lobbying as a defence of ‘national labour’. Second, they drew a stark picture – sometimes to the point of caricature – of Argentina’s ‘dependency’ on export markets. With a flair for the dramatic, an industrialist pamphlet in 1878 proclaimed: ‘We live in perfect freedom and yet under the rule of foreigners just as in colonial days.’ Sooner than expected, however, the industrialists found themselves crying alone in the wilderness. Buoyant prices for Argentina’s agricultural commodities as well as railway improvements financed by British capital induced a swift revitalisation of the country’s rural sector, so that landowners quickly rediscovered their love for open markets.15 At approximately the same time, Egypt was on the way to becoming an actual colonial dependency. Since the 1840s, Egyptian rulers and the landowning notables that underpinned their power had focused on supplying world markets with raw cotton. However, the cotton boom of the early 1860s, which induced a lavish borrowing and investment spree, quickly turned to bust, leaving the government and many land owners saddled with debt. Foreign creditors, in a bid to collect their dues, now became involved in the management of Egyptian affairs. In 1876, international creditors took control of Egyptian government finances, in a process similar to the tutelage exercised contemporaneously over the Ottoman treasury (Section 4.5). Egyptian cotton growers, who had mortgaged their lands to foreign banks, were also at risk of dispossession. In response, they formed a pressure group in 1879 advocating the establishment of a bank run by and for Egyptians: ‘Should we wait while most of our soils are mortgaged to foreigners until that day when these are sold at the cheapest prices while their owners are watching without getting support from their brothers to keep their property?’ While the movement was cast in nationalist garb, and professed ‘salvation from financial enslavement to foreigners, relative to which private gains become a secondary matter’, private

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gains were clearly important. The notables were anxious to save their mortgaged lands, and a credit institution under their control was one way of accomplishing that aim. As in Argentina, early Egyptian economic nationalism was thus a narrow and partially self-serving movement of elites. Unlike Argentina, the demise of the Egyptian movement was due less to the weakness of the protectionist coalition itself, and more to the occupation of Egypt by British military forces in 1882. This further consolidated control by foreign creditors.16 The second phase of nationalist mobilisation occurred in the interwar period. In both Argentina and Egypt, elites formulated broader nationalist programmes and mobilised wider sections of the population through antiimperial messaging. However, their rhetoric failed to bring about a lasting diminution in the economy’s external exposure or meaningful social change. In Argentina, three nationalist groups emerged. First, middle-class politicians of the Radical Party, in particular Hipólito Yrigoyen (1852–1933), assailed the dominance of domestic landowners and the outsized role of British capital in the Argentinian economy. The favourite target of Yrigoyen’s broadsides were the British railway companies, whom he accused of charging exorbitant rates to passengers, paying low wages to their Argentinian workers, as well as repatriating their profits to London. After having been elected president in 1916, Yrigoyen spotted an opportunity for further electoral gains by taking up the railway workers’ cause and encouraging labour resistance to the British railway companies. In the subsequent outrages, fired-up railway workers burned down British property under acquiescence from the Argentinian authorities. Once the smoke had settled, however, the Radicals proved decidedly mellow in following up on their rhetoric. Yrigoyen quickly recognised the importance of foreign firms, especially the railways, in getting Argentinian exports to markets. He therefore agreed to a fare increase in 1922 at the request of the British railway companies. By 1929, instead of spearheading a nationalist revolution, Yrigoyen declared British capital to be ‘sacred’. For many Radicals, the change of heart came easier once they had been offered cushy positions with British firms. Other Radicals also came to terms with the hitherto despised landowning oligarchy.17 After Yrigoyen had abandoned his isolationist experiment, Argentinian nationalist intellectuals digested his change of colours in an outburst of patriotic writings. Revisionist historians now narrated the country’s history as a Manichean struggle between liberal vendepatria elites, who had surrendered their country’s resources on the global market, and the authentic Argentinian people valiantly striving to defend their old ways. In the words of a popular tract in the revisionist genre, it was a tragic story, one of the Defence and Loss of Our Economic Independence (1943). This tragedy continued unabated to the present, according to the revisionists, as Argentinian politicians still kowtowed to the British in trade negotiations. They also

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pandered to foreign capital, as Yrigoyen had done. The revisionists therefore subjected any trade agreement with Britain or any negotiation with British companies to ferocious attacks. They were eventually joined by the Radicals, who after having been pushed out of office by the military in 1930, rediscovered their economic nationalism on the opposition benches. The revisionists were scant on economic details, but being Romantics at heart, they believed that a return to Argentina’s ‘real’ cultural essence (namely the Catholic and paternalistic social order of the country’s interior) would provide a salve to the economic problems of the interwar period.18 A third group of Argentinian nationalists played the Listian sparring partner to the revisionist Romantics. These were a school of economics led by Alejandro Bunge (1880–1943), a government statistician and academic. The Bunge Group rose to prominence in the 1930s and exerted a tremendous influence on Argentinian policy debates thereafter. Bunge and his followers agreed with the revisionists on the desirability of economic independence. They felt that a concentration on agricultural exports had left the country unduly exposed to the market fluctuations of the interwar. Moreover, the British turn to Imperial protection threatened to lock Argentina out of its principal export market (Section 5.2). Yet the solution of the Bunge Group was not primarily cultural (although they were influenced by Catholic social thought), but classically Listian. Bunge had conducted his studies in Imperial Germany and now spent much of his intellectual career applying List’s thought to Argentina. ‘We are in an economic situation similar to that of the economist List in Germany, and that of the United States forty years ago’ he wrote in his programmatic Una Nueva Argentina (1940), which envisaged the rebirth of the Pampean country as a modern manufacturing power. Bunge covered the essentials of any respectable Listian strategy: tariff protection for industry, infrastructure investment and industrial credit.19 In addition, Bunge proposed closer economic integration among the countries of the Southern Cone. These ideas would become important after the war due to their propagation, in revised form, by Raúl Prebisch and ECLA. Bunge had acted as a mentor to Prebisch at university and his advocacy of protected industrialisation and regional integration was well-known in the Argentinian policy circles where Prebisch mingled in the interwar period. Prebisch’ policy prescriptions in the 1950s thus came quite close to Bunge’s (and therefore, to List’s). The Listian flavour of ECLA policy was also noted by postwar observers (although it was strenuously denied by Prebisch himself). For both Prebisch and Bunge, the limited size of national markets in Latin America presented an obstacle to import substitution industrialisation and they believed that trade agreements among neighbouring countries could soften this constraint.20 Finally, Bunge paid close attention to social issues, on which he diverged from List. Like Henry Carey, who had long been popular in Argentina, Bunge focused on the potential for industry to absorb labour, while also advocating

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moderate agricultural tariffs to maintain employment in rural areas and inhibit the rapid pace of urbanisation. This was to be flanked by social housing programmes to ameliorate the situation of the working poor. However, Bunge’s concern for social policy was essentially defensive and largely constituted an attempt to conserve the existing order. The relationship of the Bunge Group with the rising tide of populism would therefore be highly fraught. On the one hand, Bunge’s focus on the home market squared well with Perón’s own rhetoric. Like Bunge, Perón also defended industry as an employer of ‘national labour’. In fact, Perón made direct use of the policy proposals of the Bunge Group when he implemented his own inward-looking policies after 1946. On the other hand, Bunge’s allowance for regional cooperation would not sit easily with Peronist support for self-sufficiency. Most importantly, Bunge and his associates were avowed conservatives, both socially and fiscally, who viewed Peronist pandering to the working classes with a mix of derision and suspicion. Bunge’s conception of social policy was inherently paternalistic, close to that of the industrialists whom he supported. Nationalism, as Bunge put it high-handedly ‘should not be expected from the people, it should come, first of all, from above, from those with more culture, more tradition, and greater economic means’. This was the social philosophy of Bismarck’s Germany; it hardly fulfilled the aspirations of the confident working classes of the 1940s.21 In interwar Egypt, elites showed as little inclination for comprehensive social reform as their colleagues in Argentina. Neither did they always stay true to their nationalist ideology. Egyptian elites did, however, extend the nationalist message to broader segments of the population, mobilising especially students and the urban middle classes. Initially, most Egyptians mobilised for political goals: ending British military occupation and attaining independence. To this end, the major nationalist movement, the Wafd Party, could count on a popular following throughout Egypt. Like the Indian Swadeshi movement (Section 4.4), from whom it drew its inspiration, the Wafd used its mass base to put pressure on the British occupiers, for example by organising boycotts of British goods in 1922. In doing so, the Wafd connected political and economic independence. Once mobilised, nationalist masses could also be deployed more directly for economic ends. The most skilful operator of popular sentiment was Tal’at Harb (1867–1941), an Arab entrepreneur who seized the moment to put the old plan for an Egyptianowned bank into action. The result was the founding of Bank Misr in 1920, a bank still in existence today. Most of the subscribers to the bank’s initial capital stock were landowners (who, after all, had also been the driving force behind the project forty years earlier). Yet by advertising Bank Misr as a tool for limiting foreign control of the Egyptian economy, Harb successfully pitched the project as a patriotic endeavour. Through orchestrated campaigns in the nationalist press, he convinced Egyptian savers to boycott foreign banks

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in 1922 and deposit their funds with Bank Misr. Harb also used the grassroots networks of militant students to sell his shares to the wider public.22 Such profiteering does not necessarily suggest that Harb’s focus on economic independence was only a marketing gag. Harb’s writings, which linked Egypt’s underdevelopment to a lack of native Egyptian banks, dates back to 1911. An earlier work of 1905 also focuses strongly on anti-imperialist themes. Harb started expressing many of these views after a prewar fact-finding mission to Germany, which he believed elucidated how Germans had successfully subordinated the economy to their quest for national ‘pre-eminence’. To suppose that at that time he was simply preparing to ride the coattails of a future nationalist movement would be crediting Harb with an improbable amount of foresight. Nonetheless, once this movement materialised in 1922, he was not shy of putting the patriotic beliefs of his countrymen to commercial use. All the better if their beliefs tallied with his own. This yielded results – subscriptions to Bank Misr were buoyant and Harb managed to capitalise the bank quickly.23 Harb subsequently used his bank to finance the build-up of a holding company, the Misr Group, which invested in various industrial ventures. Throughout the 1920s, he utilised nationalist messaging to underpin this commercial empire. The Misr Group would enable Egypt to break out of its agricultural dependency, he claimed, while it would also limit the influence of foreign capital. As before, nationalism, if used strategically, could be good for business. It promised loyal customers and granted access to support from the Egyptian government. It could also be employed to outmanoeuvre competitors. Harb was not alone in playing this game in Egypt. A favourite tactic, used by Egyptian industrialists well into the 1950s, was to mobilise the nationalist press against a competing British firm and its ‘imperialist’ business practices. The British firm would then be induced to withdraw under public pressure or forced into a joint venture with the Egyptian firm. At this point the patriotic rhetoric would be tuned down, and business with the British could continue. Harb himself increasingly entered into joint ventures with British firms in the 1930s, as he set his sights on projects with greater capital intensity and technical sophistication. Such collaboration invited fierce criticism from those who saw it as a betrayal of nationalist principles.24 However, Harb now required more capital than could be collected by small-scale patriotic subscriptions so that British finance became essential. Would a well-capitalised industry not serve the nation best? Such an argument was of course common to expansionist nationalists, but it did not allay the concerns of those seeking stricter isolation from Britain. Harb redefined nationalism in a similar vein when it came to labour relations. He had been fond of claiming that his Egyptian companies would treat workers much better than foreign exploiters. In reality, working conditions at Harb’s own textile mills were appalling. He therefore recast peaceful industrial

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relations and low wages as conducive to national progress. This became easier when one of Harb’s industrialist colleagues, Ismail Sidqi (1875–1950), became Prime Minister of Egypt in the early 1930s and initiated a period of labour repression and wage cuts.25 Another way in which Harb and various Egyptian governments made economic nationalism work for them was ‘Egyptianisation’. This was a vague term, which could refer either to the transfer of jobs or to the transfer of assets from foreigners to Egyptians. Egyptianisation was nonetheless attractive to governments and their industrialist supporters. To the latter, it offered a chance to buy up coveted industrial assets. For the government, Egyptianisation could redeem nationalist credentials tarnished by collaboration with British capitalists or the abrogation of labour rights. To the middle classes, the policy promised stable and well-paid jobs. Laws decreeing nationality quotas in enterprises were therefore promulgated in 1927 and 1947. However, these measures also raised popular hopes that could not easily be fulfilled, especially for poorer Egyptians. First, Egyptianisation was rarely accompanied by other social measures. Second, a change in the nationality of managers alone did not necessarily improve the workers’ lot.26 The increasingly close cooperation between the government, domestic capitalists and the British further discredited large segments of the Egyptian elite as bearers of the nationalist torch. In a bid to shore up popular support, the last Wafd government (1950–52) moved towards the largest nationalist prize of all: the nationalisation of the Suez Canal. Operated by a French company and lying at the interstices of British world trade, it had been built with Egyptian sweat and treasure during the 1860s. As such, the Suez Canal was a lightning rod for nationalist mobilisation. The government did indeed rapidly inflame public opinion in favour of nationalising the canal. However, the Wafd bit off more than it could chew. Caught between British troops in the canal zone and an incensed mob burning down large sections of Cairo, the industrialists’ government collapsed, paving the way for the military coup of 1952.27 By the start of the postwar period, two contradictory trends had thus emerged in Argentina and Egypt. On the one hand, feeding from a multitude of sources, economic nationalism had become prevalent. This had been encouraged by elites themselves, who often manipulated nationalist sentiment for electoral or commercial gain. On the other hand, elites had not always adhered to their own nationalist rhetoric, with their foreign business collaborations revealing their vendepatria disposition. Their own interests and their ideological focus on growth made them unwilling to truly commit to isolationist programmes. Moreover, elite development strategies were illequipped to deal with the social concerns of the working classes. In the postwar era, the final stage of our story, populist leaders capitalised on these contradictions to create broad-based movements that were both ‘authentically’ isolationalist and socially redistributive.

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The military coups of 1943 and 1952 that catapulted Perón and Nasser into the limelight were carried out by groups of officers with little coherent economic ideology. As professional soldiers, they had some preference for self-sufficiency in military industries. They were also subject to the same protectionist pressure from domestic industrialists as previous governments. Perón had in addition studied the careers of Mussolini and Vargas closely and professed admiration for economic modernisation. Overall, Perón and Nasser started out in their governing roles with a rather positive view of foreign capital. The Egyptian officers granted concessions to foreign oil companies, and Nasser reproached angry students remonstrating with his regime for accepting American aid. ‘We cannot live in isolation, refusing any helping hand, because we think it has ulterior motives behind it’, Nasser explained, ‘it may have happened before, but it was we who let it, because we were not alert’.28 Similarly, Perón initially negotiated amicably with the British railways, opposed their outright nationalisation and welcomed foreign investors.29 However, both regimes changed course quite quickly. Perón, we have seen, came into contact with members of the Listian Bunge Group in the mid-1940s and their ideas on strengthening the internal market flowed into the first Peronist Five Year Plan. Yet political opportunism was more important, because the nationalist agitation of the past decades had ensured that openness was a decidedly unpopular policy. Perón experienced a harsh backlash against his early pro-British railway plans (charges of vendepatria were heard). He quickly reversed course and duly nationalised the British railways in 1948. In terms of public relations, this was a winning move that earned him the enthusiastic support of the nationalist masses. Privately, Perón expressed unease about the mounting nationalist pressure on the conduct of economic policy. In practice, however, he and his regime exhibited few inhibitions in capitalising upon such sentiment for short-term political gain.30 In Egypt, similarly, the foreign ownership of the Suez Canal and the attendant occupation of the canal zone by the British could not be ignored easily. Neither could the popular pressure to push back the role of foreigners in the economy more generally. Nasser’s eventual nationalisation of the canal in 1956 and his subsequent military stand against Britain, France and Israel ensured him huge popularity throughout the Arab world. The whole swath of sequestrations of French, British and Jewish-owned property which followed was similarly met with public approval. These sequestrations of personal and corporate property were accompanied by the expulsion of foreign nationals, many of whom had been important business people. Foreign property unrelated to the Suez crisis was also sequestered in the subsequent years, while foreign banks were ‘Egyptianised’ in 1957. Just like Perón, Nasser built on existing nationalist sentiment.31 While nationalisation was an important instrument for regime preservation, so was redistribution. Perón’s labour reforms had built his reputation as

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a friend of the working man, evening his path to the presidency in the 1946 elections. Once at the helm, his policies increased the bargaining power of labour in enterprises and strengthened minimum wage legislation. He then constructed an economic system that consolidated these gains. A nationalised banking sector provided subsidised loans to domestic industries to increase employment. Foreign exchange restrictions and import prohibitions effectively shielded Argentinian businesses from external competition and allowed them to cope with higher wage costs. A state trading organisation was given a monopoly over exports, depressing internal food prices to the benefit of urban workers. In effect, this broke the back of the grain and beef exporting landowners.32 Nasser took even more radical redistributive measures in Egypt. One of the first, and most popular, acts of the officers’ regime was the expropriation of large cotton-producing landowners. After the ‘Egyptianisation’ of foreign assets of 1956, Nasser also moved to expropriate the majority of large ‘domestic’ enterprises, including the Misr Group. Once under state supervision, these conglomerates were used to expand wages and employment. The latter was guaranteed by government decree to all Egyptian graduates. Similar to Argentina, this was only temporarily sustainable through the heavy use of subsidies. It also required government control over the economy’s external interface to protect increasingly uncompetitive domestic firms. From 1960 onward, the Egyptian economy was effectively operating as a closed system, exempting some bilateral trade agreements with the socialist block, to which Nasser was increasingly drawn.33 The closed economic order of Perón and Nasser was self-reinforcing. It provided power to new ‘insider’ groups of workers and bureaucrats who benefited from the absence of competition. This created further demands for nationalisations and trade barriers. It also reinforced narratives about the desirability of self-sufficiency. Once they were committed to a closed economy, Perón and Nasser rescinded their earlier permissive rhetoric towards foreign investment. Their propaganda now identified the discredited open-economy model with ‘oligarchy’ and elitism. The Argentine president, ever the master of publicity, decreed 9 July 1947 to be the ‘Day of National Economic Independence’ (Argentina’s national hero San Martín had proclaimed the country’s liberation from Spain on this day 131 years earlier). During the proceedings, a solemn declaration was read to the crowds in which Perón promised ‘a revived economy free from foreign capitalism, from global economic hegemons, and from the Argentines [nacionales] compromised by them’. For good measure, celebrations were repeated with tremendous bombast a year later to mark the nationalisation of the railways in front of a jubilant populace at the Buenos Aires railway station. In reality, the deal proved a boon to the railways’ British vendors, who were glad to sell their outdated equipment for an inflated price. Yet this was immaterial to the Peronist press, which

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proudly insisted that ‘liberty has no price’.34 Much propaganda effort was also put into presenting the president as a tough trade negotiator getting the best deal for Argentina on the world stage, despite Perón’s chequered record in obtaining higher prices for the country’s exports. Many of these propaganda materials were printed as picture books to better illustrate the president’s successes to the average citizen. For example, a colourful 800-page atlas issued by the government in 1950 contrasts Perón’s dispensation with the preceding ‘oligarchy’. Under the old regime, we see pictures of ocean-going ships suck gigantic amounts of Argentinian grain and cattle out of the country, in addition to winged peso coins taking flight to pay back interest. The visualisation of Peronism, reversely, reveals swelling stacks of coins for Argentine producers and workers, while domestic banks nurture factories on home soil.35 Nasser was similarly concerned with recasting his regime as a bulwark against imperialism. Despite the undemocratic nature of his regime, popular support was vital to his political survival. The Charter of the United Arab Republic (1962), which Nasser issued in lieu of a constitution, was a propaganda document that tried to consolidate such support. The Charter presented the military takeover of 1952 as the culmination of a glorious struggle against foreign economic domination.36 Almost as pernicious as the British and Zionist imperialists, the Charter pointed out, were their domestic allies: ‘landlords, merchants and foreign exporters’. They had deceived the common man with superficial Egyptianisation, while profiting from collaborating with global capital.37 Tala’t Harb and his 1920s scheme for Bank Misr were also implicated in this ruse: ‘the Egyptian people who faced the revolution for the sake of progress and attempted to pool, encourage and direct the savings towards development, have never forgotten that the big local capitalism was, throughout many national revolutions, able to convert the results of these revolutions into profits for capitalists’.38 Now, fortunately, the people had in Nasser a stalwart defender of their economic rights and independence, who knew that the only way forward was the elimination of the old ruling class.39 As such, the Charter provided a justification for domestic expropriation that was firmly rooted in a quest for economic isolation. It was through their linkages with the global commercial order that elites had disqualified themselves from full membership in the national community. In the populist parlance of Nasser and Perón, the ‘real’ Egyptians and ‘authentic’ Argentines were inward-looking. The divisive rhetoric and the redistributive policies of both presidents did not go uncontested. Perón was himself overthrown by a military coup in 1955 and Nasser likewise feared opposition from his senior army colleagues. Moreover, economic constraints, irreverent to populist propaganda, eventually began to bite. Perón was forced to cut back on wage growth and allow foreign investment in the 1950s in the face of budget deficits and inflationary pressures. Nasser similarly had to diminish government control over the

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Egyptian economy after the disastrous defeat in the Six-Day War of 1967 against Israel (although shortages of consumer goods had appeared even before that conflict). Yet it is testament to the power of their word and the persistence of the coalitions they created that the myth of both men lives on, quite unharmed by these material setbacks. In Argentina, policy discriminated against agricultural exports and in favour of the internal market until the mid1970s. Even after Perón’s fall, Peronists managed to stymie efforts by the new Argentinian government to cooperate with Prebisch and ECLA in the late 1950s, despite Prebisch’s popularity in other Latin American countries. Argentinian populists continued to identify Prebisch with conservatism in the mould of Bunge and with unwanted international cooperation. Perón himself managed to stage a brief comeback as president in 1973. Today, Peronism, in one form or another, continues to be the most powerful political movement in Argentina. Nasser’s regime could count on popular mass support even in the face of Egypt’s military defeat in 1967. The alternative commercial policy of infitah (openness) pursued by Nasser’s successor Anwar el-Sadat in the 1970s never enjoyed such support. Instead, infitah was stymied by dogged resistance from Egypt’s old guard of isolationists. The consequences of populism proved to be long-lasting.40

6.3 Nationalism and Socialism: Ghana and Tanzania Throughout the twentieth century, various elements of socialism have been compatible with a ‘national’ understanding of economics. This occasionally reflected interest group politics. The Zionist labour movement, for example, developed ethno-centric perspectives corresponding to their incentive to exclude ‘foreign’ workers from the labour market (Section 5.4). At other times, collectivist preferences could unite nationalists and socialists. Mussolini was initially attracted to socialism for its communitarian spirit (Section 5.6). However, the most potent intersection between nationalism and socialism occurred whenever capitalism as a whole was equated with foreign control. Mao Zedong could criticise international investors in China on grounds of them being both foreign and capitalist (Section 5.5). In contexts of colonial subjugation, this association was further strengthened. Hence, both Marxists and nationalists could castigate the imperial imposition of free trade and the ensuing ‘exploitation’ of colonial India, Ireland and Egypt (Section 4.4). A similar association fuelled nationalist movements in sub-Saharan Africa in the mid-twentieth century, where socialist leaders such as Kwame Nkrumah in Ghana and Julius Kambarage Nyerere in Tanzania saw the building of a national economy as a logical continuation of anti-imperialist politics.41

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The turn by African nationalists to socialism stemmed, in addition, from the challenges they faced in building an independent and prosperous economy, challenges which were more daunting than those confronting other anticolonial movements. Ghana and Tanzania boasted much smaller domestic markets than India, were much poorer than Ireland, and their national elites were less well-established than those of Egypt. This dilemma forced African nationalist leaders into two painful compromises. First, they realised that economic development would continue to require commodity exports, foreign investment and aid. This needed to be balanced against the spectre of economic exploitation that such external assistance would invite. Second, any degree of self-reliance would require an enormous mobilisation of domestic resources that would inevitably demand sacrifices from some segment of the population. The ensuing distributional conflicts would either call for postcolonial elites to lower their personal accumulation of wealth, or force them into an extractive relationship with the local peasantry. Socialism provided a way to blunt the edge of both trade-offs. It could, first, be seen as a way of efficiently mobilising domestic resources and hence limit the need for external finance. Second, the socialist emphasis on social harmony could lessen domestic distributional tensions. In other words, African socialism was a means to square the circle between self-sufficiency and development. It was a system geared to nationalist ends.42 Another signature element of the ‘national’ content of African Socialism was its emphasis on indigenous paths of development. Nkrumah, and more expressly Nyerere, opposed the wholesale import of European Marxism into Africa. Instead, their socialism was to be aligned with African values and traditions. Such indigenisation heightened the usefulness of socialism as a tool for nation-building. It may be easy to criticise such attempts in hindsight because the fruits of development and nation-building remained often elusive as external and internal tensions mounted. Yet one should not make the mistake of assuming the inevitability of failure. Nor should we rashly assume that the modernising intents of Nkrumah and Nyerere were insincere. The popular image of the post-colonial African state as a perennially weak structure commanded by tin-pot dictators is misleading. It owes more to the exceptionally dire circumstances in which African states founds themselves in the 1980s and early 1990s than to the entirety of post-colonial history. In fact, African leaders invested heavily in expanding the apparatus of their states in the first fifteen years after independence.43 If anything, in the implementation of their nationalist visions, leaders such as Nkrumah and Nyerere reshaped the lives of many of their citizens to an extraordinary and often frightening degree. The more pertinent question is not why developmental ideologies were not pursued in Africa, as they clearly were, but why these ideologies were so powerful that they persisted despite their modest results.44

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One reason for the staying power of African developmentalism was its connection to three widespread global discourses. These transnational narratives were important, even if Nkrumah and Nyerere attempted to root their ideas in local soil. Socialism was obviously global, and its appeal could be reinforced by strategic alliances with the Soviet Union or China, if one was not too outright about rejecting its Marxist or Maoist variants. Second, statist conceptions of development planning were hardly a Soviet invention. These approaches were also en vogue in Western economics departments and international organisations (like ECLA). Both Ghana and Tanzania built on the advice of foreign development planners, the most notable of whom, Arthur Lewis (1915–91) and Gunnar Myrdal (1898–1987), would win Nobel Prizes in Economics in the 1970s. Clearly, African governments were broadly in tune with the international policy consensus.45 Third, like many post-colonial leaders on the continent, Nkrumah and Nyerere embedded their visions of national progress within a Pan-Africanist vision. This shared identity could reinforce domestic policy choices.46 *

Similar to attempts at regional integration in Latin America or the Arab world, Pan-Africanism called for the unity of economically weak, but culturally similar, peoples against the dominance of ‘imperialist’ powers. Unlike Latin American views of integration, the roots of Pan-Africanism lie to a greater degree beyond the continent itself. This is due to the African diaspora in the United States, the Caribbean, and to a lesser extent in Britain. The impact of diaspora Pan-Africanism on Africa itself stems in part from the education many nationalist leaders of Anglophone Africa received in the United States and Britain.47 Kwame Nkrumah, a talented man of modest means from the British Gold Coast, was one of these nationalists. He enrolled at Lincoln University, a historically Black college in the US state of Pennsylvania, in 1935. Over the next twelve years, Nkrumah would move from the academic study of economics, sociology and politics at Lincoln to the street debates of New York’s Harlem Renaissance and finally to the anti-colonial circles in London where African expatriates met. Marxism, but even more so PanAfricanism, became the defining features of his thought.48 Of particular importance were the ideas of Marcus Garvey, an Afro-Jamaican campaigner who had moved to the United States to grow his Universal Negro Improvement Association (UNIA) in Harlem in 1916. Garvey had been appalled by the racial discrimination and social exclusion faced by many African-Americans in the United States. ‘Where is the black man’s Government? Where is his King and his kingdom?’ Garvey asked in consternation, ‘where is his President, his country, and his ambassador, his army, his

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navy, his men of big affairs? I could not find them, and then I declared, “I will help to make them”’. To make these ‘men of big affairs’, Garvey developed a radical ideology centred on the need for power: ‘A race without authority and power is a race without respect.’49 Power, according to Garvey, came from racial unity, from political independence, but ultimately ‘through a solid industrial foundation . . . Take away industry from a race; take away political freedom from a race, and you have a group of slaves’.50 ‘Negro producers, Negro distributors, Negro consumers!’ Garvey exclaimed, ‘the world of Negroes can be self-contained’. Economic emancipation was to be a global endeavour – Garvey founded all-black industries and a shipping line, the Black Star Line, that was to connect the African diaspora in North America, the Caribbean and Africa.51 Eventually, the goal was a ‘return’ of the diaspora to Africa and the establishment of one Black nation spanning the continent.52 This nation would protect Africa’s mineral resources from ‘Wall Street and the capitalist group of America’, providing ‘the chance to every Negro to make every effort toward a commercial, industrial standard that will make us comparable with the successful businessmen of other races’.53 For Garvey, it should be noted, economic nationalism was quite compatible with business success and personal advancement. He held that this was preferable to the ‘traps and pitfalls’ of ‘white’ communism, which would not lead to Black advancement.54 By the time Nkrumah studied in America, Garvey’s heyday of the early 1920s was past, but his legacy of Black economic nationalism remained influential. Nkrumah would later describe Garvey’s writings as decisive for his own intellectual evolution.55 Another Black thinker who connected economic independence and PanAfrican nationalism, albeit in more nuanced form than Garvey, was W. E. B. Du Bois. His epochal life of ninety-five years spans several eras and continents. While the Harvard-trained social scientist would make his mark on the USA as the founder of the National Association for the Advancement of Colored People (NAACP), he had spent his formative years as a graduate student in 1890s Imperial Germany. There Du Bois had worked quite closely with Adolph Wagner and Gustav Schmoller, the principal exponents of national economics in Berlin (Section 4.2). It seems that their influence was profound. On his return to the USA, Du Bois connected his engagement for civil rights and racial equality with a focus on economic independence for black Americans.56 This was closer to Garvey’s Black economic nationalism than to orthodox Marxism. In fact, although Du Bois engaged closely with Marxist thought, he warned, like Garvey had done, against its uncritical adoption. In particular, he argued that the necessity for Black economic emancipation was ignored in Marxist theories, which were obsessed with class struggle, rather than racial divisions.57 Instead, Du Bois proposed that black Americans found autonomous cooperatives in the European mould that ‘would insure the economic independence of the American Negro for all time’.

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His economic philosophy, moreover, extended beyond African Americans, and embraced Pan-Africanist perspectives: ‘Pan-Africa means intellectual understanding and co-operation among all groups of Negro descent in order to bring about at the earliest possible time the industrial and spiritual emancipation of the Negro peoples.’58 Du Bois was equally engaged in Pan-African politics, which he saw as a global nationalist movement similar in spirit to Zionism (Section 5.4).59 Presiding over the landmark Pan-African Congress of October 1945 in Manchester, he forged ties with the attending Kwame Nkrumah. Du Bois went on to exert a strong influence on Ghana’s future president and would eventually spend his final days in Ghana as one of Nkrumah’s principal mentors. In this he was not alone – Du Bois was only the most prominent of a number of Pan-Africanists who settled in Ghana after the country’s formal independence in 1957, drawn by Nkrumah’s promise to put the vision of a united and commercially sovereign continent into practice.60 However, the realistic prospects for Pan-African economic unity from its Ghanaian base were limited. It is true that, prior to decolonisation, there were important links between African economic protest movements across West Africa. Nonetheless, by the late interwar period, the organisation of these protests had become confined to established colonial borders. Two examples from the colonial era illustrate this. First, a common complaint among African businesspeople was their exclusion from credit provision by British banks due to racial discrimination. Africans reacted to this discrimination by setting up separate financial institutions managed by themselves. Although early forms of such ‘political enterprises’ were West-African in scope, they increasingly focused their activities on a single colony, mostly on the largest – Nigeria. Second, there were impactful protests by African farmers and traders against the domination of the cocoa trade by foreign import-export houses. Protesters highlighted how these expatriate firms depressed the prices they paid to indigenous cocoa growers and forced African traders out of the market. As a response, protesters refused to sell cocoa to foreign traders and boycotted imported manufactured goods. In the late 1930s, these boycotts engulfed the Gold Coast (Ghana) and spread to cocoa regions in British-held Togoland and Southern Nigeria. Nonetheless, the African associations supporting these protests were largely organised at the level of the individual colony, in part because the colonial authorities with whom they negotiated operated at this level. Within the Gold Coast, the boycott welded together a diverse coalition of local chiefs, cocoa growers and traders. The success of this economic coalition crafted a nationalist movement that would eventually press demands for the independence of the Gold Coast alone. Much of the remainder of colonial West Africa followed three years later. One result of local economic protest movements, therefore, was that colonial borders shaped the form of anticolonial demands.61 This was the political framework Nkrumah and his

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nationalist allies inherited in the 1950s. Nkrumah, like most other early African leaders, accepted these established borders as fait accompli. Nonetheless, he vowed to use Ghanaian independence as a stepping stone to future Pan-African unity.62 There is one more element of Pan-Africanism that remained important in post-colonial Ghana: the local protest movements validated the association between colonialism, Western firms, and the discrimination of black workers and businesses that Garvey and Du Bois had written about. Nkrumah promised that national independence would break this circle by providing opportunities for African economic advancement. Confidently, he entered a wager with the leader of Côte d’Ivoire, Félix Houphouët-Boigny (1905–93). Côte d’Ivoire sought to maintain close ties to the French colonial power in the form of a monetary union and continued French investment. Houphouët-Boigny was willing to compromise on economic independence because he believed that these economic links to France would spur growth. Nkrumah disagreed. The building of a national economy in Ghana, he wagered in 1957, would enable faster growth than Côte d’Ivoire’s strategy of openness ‘within one decade’.63 Nkrumah initially attempted to win his wager without resort to socialism. He quickly set to work to create the economic institutions expected of an independent nation, among which was the establishment of a national currency to replace the British Pound. Eventually, the currency was renamed cedi in memory of ancient indigenous monetary units. Its banknotes were designed to reflect Ghana’s economic aspirations: modernised cocoa agriculture, development projects and newly founded national enterprises. These enterprises were state-run corporations that included a national bank, a national airline and a national shipping company. The latter was christened the Black Star Line in evocation of Marcus Garvey’s Pan-African enterprise. To observers, many of these measures had the character of imitation, a ‘symbolic nationalism’ that ticked prestige projects off a list derived from the experiences of rich countries.64 Moreover, state enterprises also quickly turned to tools for nepotistic rule, because they provided high-paying jobs and business opportunities for the upper echelons of the new Ghanaian elite. However, Ghana’s policies were not mere exercises in imitation, nor were they exclusively an attempt to use the post-colonial state as a feeding trough. Both the symbolic character of the national enterprises, as well as their redistributive purpose, are also the products of Ghanaian economic nationalism, especially the legacy of racial discrimination. As we have seen, discrimination against African businesspeople had been a key concern voiced by local nationalist groups in West Africa since colonial times. Pan-Africanists like Garvey and Du Bois had also pressed for Black enterprises as a tool of national self-emancipation. Garvey in particular had equated personal advancement with economic development. His quest to make ‘men of big affairs’ was also an emancipatory project. In the

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minds of Nkrumah and the new elites, therefore, personal and national advancement were interwoven.65 However, anti-colonial nationalism alone could not diffuse the potential redistributive conflicts between the new elites and the remainder of the population. Nkrumah’s commitment to socialism from 1961 onward can be interpreted as providing a broader rationale for his national enterprises. His key work of interest here is Neo-colonialism: The Last Stage of Imperialism (1965). The book was possibly ghost-written, fuelling the Ghanaian quip that Nkrumah’s ideology was really the last stage of opportunism, but it aptly demonstrates how the president wanted to be perceived.66 The title obviously echoes Lenin’s famous Imperialism, the Highest Stage of Capitalism (1917), but apart from some brief passages at the start and end of the work, it contains little in the way of class analysis or Marxist theory. Instead, it paints a damning panorama of the activities of foreign multinational companies across the African continent. Political sovereignty, Nkrumah admits, is not sufficient in face of the preponderant influence of foreign firms. These multinationals are the continent’s true rulers, draining Africa’s resource wealth, buying governments and calling on American military muscle. Against these shock troops of neocolonialism, what better defence than the establishment of Ghanaian national enterprises?67 Nkrumah’s Neo-colonialism also connects socialist ideas and development at the macroeconomic level. This is because he depicts capitalism as inviting dependency through foreign aid and debt. According to Nkrumah, the exorbitant interest rates charged by ‘Wall Street’ were to blame, as were the political conditions imposed by the World Bank and the International Monetary Fund (IMF) on debtor countries. Under these circumstances, industrialisation was impossible, meaning African countries would be trapped in an agricultural ‘colonial economy’.68 There were three ways out of this trap. First, foreign investment needed to be regimented in a ‘national plan’. This ‘struggle against neo-colonialism is not aimed at excluding the capital of the developed world from operating in less developed countries’, cautioned Nkrumah, ‘it is aimed at preventing the financial power of the developed countries being used in such a way as to impoverish the less developed’. By leaving the door open to foreign investment, Nkrumah was a realist in the face of Ghana’s poverty. His solution to use the state as a gatekeeper to control this capital echoes the similar compromise proposed by Sun Yat-sen (Section 5.5).69 Second, Nkrumah argued that poverty reinforced the rationale for Pan-Africanism. It was imperative for African countries to unite economically against the power of the multinationals, to provide enlarged markets for their own industry, and to improve the bargaining position of African commodity producers in world markets. It was only as ‘a single African unit, that Africa will be able to develop industrially’. Garvey’s influence is notable here.70 Third, Nkrumah proposed

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that ‘comprehensive socialist planning’ was the most appropriate system for mobilising resources quickly.71 In other words, Nkrumah’s socialism was not only a way of rationalising the existence of national firms ‘free from alien control and domination’, but also a system for rapid development.72 Moreover, socialism was apparently quite in harmony with the old Listian argument that economic unions were sometimes required for industrialisation if one’s ‘own’ market size was lacking. In all these arguments, Nkrumah did not come across as an antiimperialist firebrand. Like many nationalists of his era, he attempted to combine autonomy with fast-paced development, which meant he had to make compromises. Socialist resource mobilisation was, plainly, one way of easing these trade-offs.73 The macroeconomic policies pursued by Nkrumah’s administration in the 1960s reflected these developmental compromises. He raised import barriers through tariffs and licensing systems to protect infant industries and taxed cocoa agriculture to syphon off resources for the industrial ‘Big Push’. Capital controls were introduced, but Nkrumah nonetheless solicited foreign investment for his hydroelectric mega-dam on the Volta River when domestic resources dried up (which they quickly did).74 There is little doubt that Nkrumah was unsuccessful in reconciling the tensions in his programme. He was unceremoniously ousted by a military coup in 1966 – neither nationalism nor socialism had been able to obscure the profiteering by many ministers in his government or solve the dereliction of the cocoa sector. Neither was Ghana’s promised modernisation in sight. PanAfricanist adventuring proved to be a drain on Ghana’s resources, instead of a boon. However, despite his eventual failure, Nkrumah set the pace for much developmental practice across sub-Saharan Africa. Socialist or not: import substitution, national enterprises and regimentation of foreign investment became the norm in the 1960s.75 The importance of Ghana’s example is evident in the story of Nyerere’s Tanzania. This east-African country provides an even better touchstone for the thesis that African Socialism was complementary to African economic nationalism. Whereas Nkrumah’s socialism could be dismissed as lip service, this is less easily done for Nyerere’s. Even as president, Nyerere was guided by intellectual reflection and a drive to share his philosophy with others, qualities that earned him the honorific Mwalimu (‘Teacher’ in Swahili). His early biography shows overlaps with Nkrumah’s path. He was raised as the son of a chief of the Zanaki people, in the remote North-West of the country. Julius Nyerere’s relatively privileged social position eased his access to Western education and he read classical political economy and philosophy at Edinburgh from 1949 to 1952. He devoured the classics, especially JeanJacques Rousseau, and was attracted to the thought of the Fabian socialists, a moderate group of social-democratic reformers in Britain. In London,

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Nyerere also mingled with the Pan-Africanist circles that Nkrumah had been active in.76 Nyerere built his philosophy around the principle of social equality. This is the wellspring of both his socialism as well as his economic nationalism. The first link is self-evident for Nyerere: socialism is the sharing of wealth. As Nyerere wrote in 1962, ‘Tanganyika will prosper; and that prosperity will be shared by all her people. But it must be shared. The true socialist must not exploit his fellows.’77 The link between social equality and nationalism is partly a product of the colonial experience for Nyerere (as it had been for Nkrumah). Colonialism was built on racial discrimination. Moreover, it had created economic inequality because it promoted the individual ownership of land, which undermined communal relations.78 Yet Nyerere should not be read exclusively as an anti-colonial thinker. Rather, it helps to draw a parallel to the French protectionists of the early nineteenth century (Section 3.2). This parallel may not be accidental, because both Nyerere and the French protectionists drew heavily on Rousseau’s exaltation of equality and community. Like the French school, Nyerere felt that extensive foreign trade and investment would only benefit a small stratum of the population. The resulting inequality would dissolve family, communal and ultimately national ties.79 In Nyerere’s case, there are two crucial African dimensions to this belief. First, Nyerere maintained the Pan-Africanist vision of continental brotherhood.80 Second, the community which Nyerere wished to preserve was a uniquely African one. According to Nyerere, it was built on the traditional mode of communal living in the villages, where production took place jointly and wealth was shared. The African village, according to Nyerere, is at once innately socialist, as well as the building block of national unity. ‘We, in Africa’, writes Nyerere with considerable generalisation, ‘have no more need of being “converted” to socialism than we have of being taught democracy. Both are rooted in our own past – in the traditional society which produced us’.81 Clearly, Nyerere’s brand of narodnik socialism is much more community-oriented than the revolutionary mass societies envisaged by a Marx or Lenin. Nyerere christened his socialism Ujamaa, or ‘Familyhood’ in Swahili. While Ujamaa was ‘socialism’, it was opposed ‘to doctrinaire socialism which seeks to build its happy society on a philosophy of inevitable conflict between man and man’.82 The concept of Ujamaa was attractive to Pan-Africanists (and to some Western intellectuals), because it presented an African alternative to European ideologies. Like all attempts at imagining communities, Ujamaa’s depiction of autarkic village life nonetheless contained a large element of myth-making. Nyerere’s characterisation of ‘traditional African’ life hardly reflected the multifaceted reality of Tanzania, let alone that of the continent as a whole.83 Ujamaa was first published in 1962, when Nyerere had just secured Tanzania’s independence from Britain (as Tanganyika) and he had become the country’s first president. Nonetheless, Ujamaa had at first little impact on

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policy. As Nyerere initially emphasised, socialism was ‘an attitude of mind’ and not primarily an economic system. Instead, his government pursued a strategy of close economic cooperation with the former colonial overlords. The reasons were simple: Tanzania was poor, even more so than Ghana, and it required skilled British workers, investment and aid.84 Yet the results of this strategy of openness were not to Nyerere’s liking. International aid came with its own strings attached, and communist donors proved no more accommodating than those of the capitalist world. Both imposed their own political conditions, but ‘[i]ndependence cannot be real if a nation depends upon gifts and loans from another for its development’, surmised Nyerere in similar vein as Nkrumah.85 But most corrosive were the effects of globalisation on community. The spread of capitalist relations by foreign investors was incompatible with ‘the socialism we have said it is our objective to build’. Nyerere worried that the accelerated farming of cotton, coffee and sisal for export was creating a new class of wealthy ‘capitalist’ farmers.86 At the same time, the new postcolonial elite, as had happened in Ghana, called for a rapid Africanisation of senior positions in the civil service and national enterprises. But unlike Nkrumah, Nyerere was not content with the creation of African ‘millionaires’. They were not a sign of development, he maintained, but merely constituted a further harbinger of the dissolution of communal bonds. The widening gap between rich and poor, concluded Nyerere, meant that ‘the traditional order is dying’.87 The Pan-Africanist scenery did not look brighter. Efforts by Nyerere to craft an East African union with Kenya and Uganda floundered early on. In 1966, the coup deposing Nkrumah sent shock waves through the continent. It was clear that the combination of socialism lite and standard developmentalism had brought neither national unity nor economic progress. Nyerere, for his part, was not prepared to go down without a fight.88 Nyerere took the bull by the horns with the Arusha Declaration, which Tanzania’s ruling party issued at his request in 1967. In discussions of Nyerere’s thought, the Arusha Declaration is often meshed together with the previously published Ujamaa, but while the Arusha Declaration continues Ujamaa’s focus on community, its philosophy is very different. As a political manifesto for mass mobilisation, the Arusha Declaration’s rhetoric is of course more radical. ‘Now we want a revolution’, its opening pages read, ‘a revolution which brings to an end our weakness, so that we are never again exploited, oppressed or humiliated’.89 The fiery style is backed up by content. The exaltation of traditional brotherhood is toned down; in its place we find a paean to self-reliance in which domestic mobilisation substitutes for foreign money.90 Moreover, while equality is still important to the Arusha Declaration, it focuses more squarely on growth and economic development, which are elevated to the status of national goals.91 Socialism is now presented as collective ownership of natural resources, land and the means of production more generally. As the Arusha Declaration makes clear, collective ownership

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really means state ownership, and state ownership is a precondition for economic development.92 Like Nkrumah’s socialism, Nyerere’s socialism thus becomes instrumental to national goals. Unlike Nkrumah, Nyerere had the candour to admit as much in 1967: ‘Our purpose was thus primarily a nationalist purpose . . . The only way in which nationalist control of the economy can be achieved is through the economic institutions of socialism.’93 The new role of the ‘traditional African’ community should be understood in a similar light: as a means towards an end. Moving on from Ujamaa, the Arusha Declaration is no longer about a rural idyll worth preserving, but an attempt to press these rural communities into national service. These tightly knit communities now serve the goal of self-sufficiency: If every individual is self-reliant the ten-house cell will be self-reliant; if all the cells are self-reliant the whole ward will be self-reliant; and if the wards are self-reliant the District will be self-reliant. If the Districts are selfreliant, then the Region is self-reliant, and if the Regions are self-reliant, then the whole Nation is self-reliant and this is our aim.94

Moreover, Nyerere sought to harness the strength of communal ties to build a cohesive national identity, a unity which would be conducive to modernisation.95 Finally, the Arusha Declaration recognised that a modernised agricultural sector was essential for economic development. This did not mean that development should serve rural areas (although this was an element). Reversely, the intensified production of cash crops for export would serve overall growth as ‘the only road through which we can develop our country’.96 Industrialisation was the aim, but only as a result of the surplus earned through rural modernisation.97 In other words Nyerere shifted his weight decisively towards expansionist goals. There were, nonetheless, two remaining tensions in Nyerere’s programme. Their attempted resolution shaped the Tanzanian economy for decades.98 One trade-off was that rural modernisation still required resources, and while Nyerere realised that considerable external aid would be needed, such aid would also counteract the goal of self-reliance. Hence domestic resources needed to be used more effectively. The only abundant home resources, Nyerere stressed, were land and labour. Land could be nationalised, and production increased through a move away from individual to large-scale collective farming.99 Regarding labour, the solution was for rural residents to simply work harder. The working week, Nyerere admonished his compatriots, was too short, and holidays were aplenty. One of the few economic nationalists to pay attention to gender divisions, the president singled out rural men in particular: ‘The energies of the millions of men in the villages and thousands of women in the towns which are at present wasted in gossip, dancing and drinking, are a great treasure which could contribute more towards the development of our country than anything we could get from rich

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nations.’100 The paternalism was palpable, even though Nyerere was certainly not alone in falling for the myth of the idle peasant. Yet it was also quite in touch with Ujamaa socialism. As Nyerere had explained five years earlier, ‘an individual who can work – and is provided by society with the means to work – but does not do so, is equally wrong. He has no right to expect anything from society because he contributes nothing to society.’ Nyerere’s invectives against ‘loiterers’ and ‘parasites’ came from a similar angle.101 However, moral suasion was unlikely to spur peasants into national action and it proved difficult for the state to monitor the labour of Tanzania’s scattered peasantry.102 The second tension the government faced was how to reconcile the production of cash crops for exports with the maintenance of equality. After all, Nyerere had always maintained that ‘colonial’ cash crop cultivation was the cause of rural wealth differences.103 As a solution to the two problems of domestic labour mobilisation and inequality, the government encouraged the founding of so-called Ujamaa villages. They were Nyerere’s silver bullet. The villages were to be communal settlements clustered around collectivised farms. They were thus immune to private wealth accumulation. Communal work also operationalised the ‘traditional African’ values of cooperation for the benefit of cash crop production. Moreover, the Ujamaa villages were to be placed in central locations determined by the government, efficiently exploiting economies of scale. Given that the peasants displayed little enthusiasm to relocate from their homelands, villagisation was made compulsory for the majority of the rural population in 1973, and control of state authorities over the settlements expanded. The Tanzanian state pursued this policy with steely determination: over five million people – most of Tanzania’s rural population – were forcibly resettled to planned communal villages between 1973 and 1976. This had little to do with the romantic Ujamaa of 1962, but it had a lot to do with the goals of a top-down developmentalist state.104 The authorities’ resort to compulsion was a logical conclusion of the Arusha Declaration: villagisation solved the ‘problem’ of putting a geographically dispersed, poorly supervised and ‘idle’ peasantry to work.105 Nyerere was quite willing to demand sacrifices for the national cause, as he admitted with his usual candour: ‘This is how the nationbuilding schemes operate; people give to the nation their hands and brains instead of money, and the result is that we have roads, classrooms and so on, which we would not otherwise be able to afford.’106 Villagisation was flanked by the introduction of government monopolies on the marketing of cash crops and staple foods. In the urban sector, Nyerere moved even more rapidly to assure ‘nationalist control of the economy’. Immediately after the Arusha Declaration, expatriate import-export houses and banks were nationalised. Parastatal enterprises were now given control over foreign trade. They were also to limit the transfer of profits abroad. National investment corporations focussed on building a domestic

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manufacturing industry, largely spending surplus extracted from the rural cash crop sector. Clearly, these measures were not focused on peasant welfare. But they did fit the mould of import substitution industrialisation, albeit carried to its extreme conclusion. Nyerere’s interventions in Tanzania ran deeper than the control Nkrumah’s state had ever exercised over the Ghanaian economy, but the nationalist orientation of their African Socialism was similar.107 This did not work to Nyerere’s disadvantage internationally – many Western donor countries, and even the World Bank, rewarded his policies with increased aid. Donors similarly stepped in when Tanzania was forced to import vast quantities of food in the mid-1970s, after adverse weather and the rural disorganisation brought about by villagisation had taken its toll on Tanzanian agriculture. With the help of food imports, Tanzania survived the crisis with minimal changes in policy until Nyerere stepped down (voluntarily) in 1985. He left a poor country, with a crisis-prone rural sector and inefficient state-run industries. It is one of the ironies of Nyerere’s rule that the continuation of his policy of self-reliance required both foreign aid and food imports.108 Nyerere’s legacy of nation-building was more benign, and explains the high status his legacy enjoys in Tanzania: the country was transformed into one of the few African polities where national, rather than ethnic, identities became paramount. In this sense, Nyerere fulfilled the promise set out by the African nationalist movements, even if the pan-continental dreams of their founders remained elusive.109

6.4 The Nationalist Exporting State in East Asia The independent states of Latin America, Africa and India pursued inwardlooking strategies in the postwar era. Although their leaders pursued development, they believed they could achieve this goal while maintaining a certain degree of isolation from the world economy. East Asia seems different. Japan, South Korea and Taiwan looked outward, pushing exports and eventually foreign investment of their own. This does not mean that the ‘developmental states’ of East Asia, with their singular fixation on economic growth as a patriotic project, were any less ‘nationalist’.110 Nonetheless, it raises the question why policymakers in East Asia sought their salvation in exports and how they reconciled this expansionist orientation with the isolationist impulse that is so common among economic nationalists. An easy, and not entirely wrong, answer would be to argue that East Asian leaders recognised exports as the fastest path to growth. Because catching up with the West was their ultimate aim, they swallowed the bitter pill of opening their economies to trade. In other words, their expansionist impulse dominated any desire for isolation. This answer is not wrong, because catching up eventually became the major goal in Japan, South Korea and Taiwan. Moreover, some ideas prevalent in the region, such as those of the Meiji

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reformers or Sun Yat-sen, had already been quite outward-orientated (Section 5.5). But Sun was also a champion of protectionism, an attitude he shared with many East Asian leaders. Therefore it is hard to argue that intellectual traditions alone were decisive. Moreover, growth featured prominently on the agenda of many postwar governments in Africa (Section 6.3). It is not immediately clear why insight into the benefits of exports for growth would only be conferred on East Asian politicians. In truth, East Asia’s export turn was largely unplanned, something that we can appreciate by tracing the historical evolution of policy in the region. By way of summary: self-reliance was initially the goal of nationalists in all three countries. As elsewhere, self-reliance was at first interpreted as implying protection. This was the course taken by Japan after the late 1930s, and by South Korea and Taiwan after the late 1940s. During this period, nationalists in East Asia exhibited the same isolationist instincts as those elsewhere. However, ten years later, this strategy was under pressure. Import requirements remained high, due to postwar reconstruction in Japan and military mobilisation in Korea and Taiwan. In the absence of export earnings, the foreign exchange gap could only be filled with American aid dollars. Yet American munificence had its limits and dependence on US handouts grated the pride of national leaders (in addition to giving the USA a commandeering influence over domestic politics). Export earnings, paradoxically, could decrease the dependence of East Asian countries on the United States. Governments therefore started to push exports as a continuation of their quest for a self-reliant economy. This decision was aided by the region’s outward-looking legacies: the Kuomintang could rediscover Sun’s plea for exports, Koreans revived their earlier position as an entrepôt, and Japan remembered List’s lesson that exporting was the highest stage of national capitalism (Section 4.3).111 As much as they were pushed by circumstances to embrace exports, nationalists did not become textbook free traders. Barriers to imports and foreign direct investment remained high until the mid-1960s in Japan, and lasted a decade longer in South Korea and Taiwan. Even afterwards, commitment to openness was perfunctory. Governments continued to support domestic firms through the back door with subsidised credit, non-tariff barriers and regulatory measures. In a further twist, exports could even reinforce protectionism. The reason was that protected firms tended to become inefficient, but pushing firms to export exposed them to the discipline of the world market and trimmed their fat. East Asian leaders therefore sought to shut out foreign competition in their home markets, while minimising the inefficiency arising from such a move. In this sense, exports were one way of solving the Nationalist Dilemma. Similarly, exports could be used to tame multinational firms. Taiwanese regulations, for example, mandated that multinational enterprises operating in the country export their output abroad. Policymakers could then tap a foreign firm’s coveted technology, without suffering the

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inconvenience of its products flooding the local market. The combination of promoted exports and prevented imports lent postwar nationalism in East Asia its neomercantilist flavour.112

6.4.1 Stage One: Closing Domestic Markets The old economic model inherited from the Meiji era ran out of mileage in Japan in the 1920s. It was built on the export of labour-intensive manufactures by zaibatsu conglomerates that were supported by a strong state (Section 4.5). But export-led growth was hardly an attractive proposition in the protectionist interwar period. As in Germany, the expiry of the nineteenth-century export model gave rise to various right-wing movements that contained protectionist and anti-capitalist elements. Like the Nazis, the extreme right in Japan strove for autarky. They struggled with the same fundamental dilemma: how could a resource-poor economy dependent on food and fuel imports be isolated without provoking a debilitating economic crisis? The solutions proposed by two groups, the militarists and the reform bureaucrats, are of particular importance for our story.113 The first group was a radical faction within the Japanese army, whose solution was territorial expansion. These militarists were not content with the existing colonies of Korea and Taiwan (which had been acquired during the Meiji era), but pushed for the invasion of resource-rich Manchuria. Eventually, they pushed beyond Manchuria, triggering the 1937 SinoJapanese war (Section 5.5). During the war, the Japanese occupiers integrated the conquered territories into an autarkic economic region under their control, euphemistically dubbed the Greater East Asia Co-Prosperity Sphere. Although this bore traces of German plans for Grossraumwirtschaft, Japanese economic policy differed from other imperialist practices in its policy towards its agrarian colonies.114 In particular, South Korea and Taiwan were not only expected to supply the main Japanese islands with food and raw materials, but they were also equipped with heavy military industries by Japanese investors. This was because both territories were seen as logistical springboards for further Asian conquests and as an integral part of the Empire. They were therefore bound tightly into a pattern of forced exchange with other imperial possessions. Japanese rule left a double-faced imprint on Korea and Taiwan. On the one hand, it etched export-oriented industry and Japanese investment into its economic structure. This legacy was particularly strong in Korea, where the Japanese administration relied heavily on Korean ‘collaborators’ in staffing its army, factories, and state apparatus. On the other hand, many Koreans now inextricably connected trade with Japan to brutal oppression by the Japanese state. Korean nationalists therefore opposed Japanese policy by seeking to promote the local consumption of national products in a quest for self-sufficiency.115

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The militarist faction did not rule wartime Japan alone. A second group were the so-called reform bureaucrats. A tightly-knit clique of career officials, they produced their own ideologues and their own esprit de corps. Although they supported the militarists’ drive for self-sufficiency, they emphasised internal reorganisation over territorial expansion. The intellectual impetus behind the reform bureaucrats was Mōri Hideoto. For Mōri, mastery of technology was key: technological innovation could yield synthetic substitutes for imported inputs and therefore lessen Japan’s dependence on foreign raw materials. Moreover, Mōri believed that the private interests of zaibatsu needed to be tamed in a ‘controlled economy’. Drawing on List, Mōri argued that individual concerns should be trumped by national interests, and that these ultimately revolved around national defence. He then went beyond List, arguing for a collectivist vision of economic life in which individual wants were dissolved into symbiosis with the state and the nation, a concept that was inspired by the writings of Werner Sombart, Othmar Spann and other German Romanticists (Section 5.3). To this hotchpotch Mōri added his fixation with technology, which he saw as the material embodiment of the spiritual essence of the Japanese nation.116 The most influential practitioner of these reform bureaucrats was Kishi Nobusuke (1896–1987), who like Mōri relied on technology and state control to create a self-sufficient national economy. Yet as someone rising rapidly through the ranks of Japan’s economic ministries, Kishi was concerned with implementation. Kishi had studied German law and was impressed by German models of industrial ‘rationalisation’. These models assumed that state control over industry could whittle down excessive competition, so the remaining firms could profitably cope with smaller (but protected) markets. While this was a good start, Kishi eventually pushed for a collectivist vision of planning to mobilise resources and ‘integrate all the forces into one’.117 The state’s key lever of control would be the economy’s foreign interface. One of the reform bureaucrats’ master strokes was to institute a system of licenses for foreign currency and foreign trade operations in 1937. The bureaucrats used this law to put any firm using imported materials under their jurisdiction. Not only did this allow them to restrict imports on a discretionary basis, but the allocation of scarce licences could be used as a tool to bring recalcitrant zaibatsu in line. Control and self-sufficiency were thus two sides of the same coin.118 Like many other reform bureaucrats, Kishi tried out these ideas while running the industries of Japanese-occupied Manchuria, which was to become a model of technocratic rule. Having proved brutally effective at this task, he was subsequently promoted to organise the Japanese economy for total war in the cabinet of the notorious general Tōjō Hideki (1884–1948).119 The ideas of Kishi and the reform bureaucrats lie at the origin of postwar Japanese policy. This is because the bureaucrats, as well as many of their institutions and policies, survived Japan’s defeat in the Pacific War, the

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ensuing US military occupation and the democratisation of Japan. Paradoxically, the occupation reinforced the position of the bureaucrats. This arose because American authorities curtailed the power of the militarists and the zaibatsu, whom they held responsible for Japan’s war effort. This removed the bureaucrats’ main internal rivals. And while some bureaucrats were purged, most remained, with many rising to determine Japan’s postwar industrial policy. These included Kishi himself, who eventually helped found the ruling party of postwar Japan, the Liberal Democratic Party (LDP) in 1955 and became prime minister two years later. The immediate postwar economic situation also strengthened the bureaucrats’ hand in policy, because economic shortages prolonged many of their ‘economic control’ measures. For example, wartime destruction of factories made an immediate turn to exports unrealistic, while import requirements for reconstruction were high. The resulting external imbalance and high inflation rates made foreign exchange and trade controls like the ones the bureaucrats had already implemented in wartime indispensable in peacetime. The US occupational authorities did not initially dispute the necessity of these controls, because they were similar to emergency measures used by war-wrecked European states in the late 1940s. However, the bureaucrats retained these protections in Japan long after their function as stopgap measures had expired.120 How were the bureaucrats able to exercise such control despite Japan’s democratisation? This is not because Japanese politicians were somehow powerless to control bureaucrats (although civil servants did often enjoy significant leeway). More accurately, protectionism enjoyed broad support across the political spectrum. For instance, the most significant analysis of the postwar economy, The Basic Problems of Japan’s Economic Reconstruction, carried out by a cross-partisan group of officials and academics in 1945–46, struck a gloomy note on matters of free trade. ‘In capitalistic free competition’, the report noted, ‘many Japanese industries will be overwhelmed by gigantic modern foreign industries, and Japan’s industrial structure will thus be deformed. This will make it necessary to adopt State policies that will keep at least basic industries intact’. Scepticism extended to market allocation more generally, as the report stresses that ‘[t]he waste of economic power that would result from allowing laissez-faire’ would ‘not be permitted’. Clearly, while militarism might have been defeated in Japan, the ‘economic control’ of the interwar reform bureaucrats was thriving. In one other aspect, however, the report’s authors modified the previous fixation on top-down planning. Democratic Japan would now incorporate the patriotic efforts of the whole population: ‘A national posture will have to be assumed in which all the people do not seek an affluent consumer life but are content with minimum standards of living, consume conservatively, and increase savings – thereby contriving to recover economic power and not seeking financial assistance from the outside

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world for consumption purposes.’ Isolationist sentiment was clearly widespread in postwar Japan.121 In Korea, scepticism towards openness was also widespread. After the defeat of the Japanese colonisers, the southern half of the peninsula was occupied by the US military, who backed Syngman Rhee (1875–1965), a dissident Korean leader previously exiled by the Japanese. Given Korea’s history of forced openness at the hands of the Japanese military, President Rhee balked at commerce with Japan and erected high barriers to trade and capital flows. Former Japanese industries were transferred by Rhee to Korean businessmen. This chimed well with popular anti-Japanese sentiment.122 To this extent, Rhee’s policy did not diverge substantially from that of other post-colonial states, such as Nkrumah’s Ghana. Unlike other post-colonial leaders, however, Rhee did not prioritise growth. Instead, he used his control over foreign exchange transactions to funnel American aid dollars, which flowed liberally as the war with the communist North escalated, to Korean businesses. In exchange for aid money and economic protection, these business conglomerates (chaebols) supported Rhee’s regime politically. As many of these business leaders had collaborated with the Japanese during colonial times, this alliance tainted Rhee himself with the scent of treachery. By the late 1950s, Rhee’s regime was thoroughly discredited in nationalist eyes, and the isolated South Korean economy was marred by corruption and dependence on aid.123 The withdrawal of Japanese troops from Taiwan returned the island to Chiang Kai-shek’s Republic of China, who pursued an import substitution strategy. This requires little explanation. As we have seen, Chiang had confirmed the primacy of a self-sufficient ‘national defence economy’ in 1943. He based this on his reinterpretation of Sun Yat-sen’s Principles (Section 5.5). Sun’s writings, in turn, were officially reaffirmed as the basis for Kuomintang policy even after the Nationalists lost the mainland to the Communists in 1949 and relocated to the island. For example, the 1947 Constitution of the Republic of China, which remained in force on Taiwan, mandated that the ‘National economy shall be based on [Sun’s] Principle of the People’s Livelihood’. The trade barriers and state-owned enterprises the Kuomintang managed on Taiwan in the 1950s were therefore merely a miniature version of the system Chiang had planned for mainland China in the 1940s.124 Three factors reinforced Chiang’s isolationist approach after the loss of the mainland. Principally, the position of the Nationalists on their small island redoubt was precarious in the face of a potential Communist invasion. The attendant need for economic mobilisation prolonged Chiang’s tendency for restrictions. The second reason was the painful memory of the hyperinflation, which had eroded Nationalist support on the mainland. The desire to avoid such an experience on Taiwan led the Kuomintang to favour exchange controls. Third, there was the potential for ethnic strife on the island. The Kuomintang and other Chinese immigrants from the mainland only

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constituted a minority of the island’s population. They regarded the Taiwanese with suspicion, especially as Kuomintang rule was initially contested by many Taiwanese, who rose up in rebellion in 1947. Having brutally put down the rebellion, the Kuomintang used state-owned enterprises and red tape as one way to check the growth of native Taiwanese capitalists. This tied in with the object of the Kuomintang’s nationalism in the 1950s. They remained Chinese nationalists in Sun’s tradition, primarily concerned with the recovery of the mainland and did not become Taiwanese nationalists. Instead of fostering the integration of Taiwanese businesses, the Kuomintang forged strong links with the Chinese diaspora abroad, whose technical expertise and finance they deemed ‘national’ (Section 7.4).125

6.4.2 Stage Two: The Necessity of Pushing Exports As we have seen, there was no sudden shift in ideas or policy towards economic openness after the end of World War II. Nonetheless, strategies to promote exports were eventually introduced, in the 1950s in Japan and in the 1960s in South Korea and Taiwan. In all three cases, a concern for economic independence precipitated this strategy. Japan’s import requirements increased strongly after the destruction of its industries and the loss of its overseas territories as suppliers of raw materials, fuels and food. After 1949, US policy tied the Japanese yen to the dollar on a fixed exchange rate, such that an equilibrium in the balance of payments would have to come through either curtailing the quantity of imports or through increasing exports. Yet even the most stringent trade controls could not restrict imports sufficiently to keep up with meagre export proceeds. The shortfall was covered with American aid funds. There were now three possibilities. Japan could eschew US aid and the political ties this implied, and yank up import controls even further. This would essentially have choked off any prospect of economic recovery and condemn the country to poverty – a status unbecoming of a former great power. Continuing the status quo was similarly unpalatable, as it implied a chronic dependence on American charity. Neither Japan’s nationalists, nor the USA itself, was willing to accept this. The only way to avoid both poverty and dependence was to earn foreign exchange by pushing exports.126 It is important to emphasise, however, that the requirement to export did not imply an embrace of free trade, neither intellectually nor in policy. One of the leading intellectual exponents of the export strategy was Nakayama Ichirō (1898–1981), an economist who clearly saw the necessity of earning foreign exchange to pay for industrial inputs. One of Japan’s most liberal economists, Nakayama argued exports should be determined by comparative advantage and faced off against colleagues expounding the benefits of the home market. However, even Nakayama did not espouse free trade. He and many other

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Japanese economists believed that an economy’s comparative advantage was not static, as propounded by (neo)classical teachings. Because comparative advantage was changeable, it could be crafted through state intervention. Nakayama and his colleagues therefore advocated an industrial policy that would allow Japan to move into technologically advanced export industries. While Nakayama drew on the importance of innovation as emphasised by the Austrian economist Joseph Schumpeter (1883–1950), similar arguments could be made from a Listian perspective too.127 Akamatsu Kaname (1896–1974) did exactly this with his famous ‘flying geese model’, which was elaborated in the 1930s, but gained wider traction in the postwar era. Akamatsu had researched historical Japanese trade statistics, noting a sequential pattern of imports, home production, and exports for each product over time. For example, while Japan had imported textiles after it had been ‘opened up’ in the 1850s, Meiji policy had subsequently laid the foundations for the domestic production of garments, which were eventually exported worldwide at the start of the twentieth century.128 Now Japan could export the outputs of the heavy industries it had fostered in the interwar period. Protection was therefore a necessary, but transitory, stage in preparing a nation for international competitiveness. As Akamatsu himself recognised, he had essentially recrafted List’s theory of historical stages, where exports were the highest stage for an industrial nation (Section 3.2). Akamatsu’s theory could justify exports to economic nationalists, a justification that also built on Japan’s history as a manufacturing exporter during the Meiji era.129 This intellectual support for export policy interacted with the bureaucrats’ logic of ‘economic control’ to shape Japan’s trade strategy. At its most fundamental level, as Nakayama had argued, industrial policy was geared towards pushing exports, more precisely, geared towards Japan’s goal of earning foreign currency. Industries were therefore ranked according to their capacity to earn foreign exchange. They then received tax deductions, cheap credit and privileged access to technology and imports in accordance with this ranking. The ranking procedure benefited high-tech industries over traditional textiles, and generally strengthened the cooperation between the bureaucrats and large conglomerates. The latter were called keiretsu, which were in effect the resurrected wartime zaibatsu.130 The key body responsible for the formulation and execution of export policy was the Ministry of International Trade and Industry (MITI). This ministry was a successor to Kishi’s wartime planning bodies, from which many of its senior staff were recruited (Kishi himself patronised the ministry after becoming prime minister in 1957). For MITI, industrial policy was not only to be used in the promotion of exports. The logic of Japan’s foreign exchange mercantilism similarly required tight control over imports. As in wartime, the authorities’ monopoly over foreign exchange was crucial. The allocation of foreign currency and import licences allowed MITI to influence the behaviour of selected firms and support the emergence of

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vaunted national champions. It also allowed MITI’s bureaucrats to block individual imports, when these were judged damaging to native firms. These targeted controls operated in addition to general tariffs and quotas, which protected entire industries from external competition. In the 1950s, the Japanese economy therefore developed along a dual track: a protected domestic sector largely unreliant on imports existed alongside a small number of import-consuming conglomerates that were geared towards generating export earnings. This was the path some other Asian countries would follow.131 South Korea’s ascent along this path, however, was not preordained. The protectionist regime of Syngman Rhee, with its reliance on American aid and corrupt chaebols, was toppled by popular protests in 1960. The successor government, in turn, was overthrown scarcely a year later by a group of army officers, from among whom Park Chung-hee (1917–79) emerged as the new strongman. Park’s era has gone down in history as that of South Korea’s phenomenal growth spurt. Working for exports indeed became part of South Korea’s national ethos in the 1960s. Yet it is worth reflecting briefly on how unlikely such an outcome must have been in 1961. A comparison with Egypt under Nasser (Section 6.2) illustrates this well. Both Park and Nasser were military men, who came to power through coups. The regimes they replaced were corrupted democracies, relying on the allocation of protectionist rents to domestic businesses to maintain power. In both Egypt and South Korea isolationist nationalism ran deep among the population on account of their countries’ colonial pasts. The collaboration between domestic capitalists and foreign imperialists (British or Japanese) as well as their involvement in domestic corruption had left business discredited. The fact that after Rhee’s ousting, business executives were led through the streets of South Korea with signs emblazoned ‘I was a parasite on the people’, demonstrates the extent of Korean anti-elite sentiment. Like Egypt’s Free Officers, the military junta in South Korea therefore trumpeted ‘cleansing of corruption’ and ‘national renewal’ as their goals. Moreover, the first Five Year Plan the Park regime produced was hardly outward-looking: it emphasised planning, protectionism and a ‘self-reliant economy’. Yet despite these similarities with the Egyptian situation, Park eventually turned to labour repression and export-led growth in Korea, while Nasser continued with populist redistribution and import substitution.132 Why? The threat of annihilation by North Korea may have instilled a greater urgency to industrialise in South Korea. However, Park’s focus on military industries only came in the 1970s. In any case, Egypt was also involved in a shooting war, against Israel.133 A more decisive factor was the balance of payments constraint in South Korea. As it had been in Japan, the need to wean the country of American aid was a key factor in leading Park, who strongly prioritised ‘economic self-sufficiency’, to push exports in the early 1960s. But this exigency, too, needs to be put into context, as Egypt’s external trade was

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hampered by foreign currency shortfalls too. What mattered in addition were the mental models policy makers could fall back on to interpret these challenges. Egypt’s Free Officers in the 1950s had looked to Perón. Park’s horizon in the 1960s was different – he looked to Japan. The model function occupied by Japan was not just due to the country’s proximity and its accelerating growth rate, but also due to old colonial links. Park himself had served as an officer in the Japanese army in Manchuria, the technocratic testing ground of Japan’s wartime ‘reform bureaucrats’. Korea had also been an industrial exporter under Japanese rule. And despite Park’s public display of antiJapanese sentiment, he remained a strong admirer of Japan’s economic model. The remaining factors were, first, fortuity. The escalation of the Vietnam War accelerated US demand for South Korean supplies, thus creating a booming export market. Finally, the superior repressive capacity of Park’s state mattered. Industrial peace allowed Park to keep wages at a level low enough to compete in export markets. Behind Park’s propaganda of exporting as a ‘national duty’ and ‘Korea National Export Days’ stood the foreman’s drill and the policeman’s baton. This, too, was a legacy of the colonial state the Japanese had built.134 Repression also allowed Park to ignore popular isolationist and antiJapanese sentiment. He concluded a normalisation treaty with the old adversary in 1965, which brought access to the Japanese technology and funds needed to upgrade South Korea’s fledging export industries. However, Park was isolationist enough not to allow foreign firms free access to the Korean market. Regarding Korea’s openness to Japan, he claimed that ‘it will be one of the historic missions of this nation, which has suffered from foreign aggression, to take special measures to prevent a manner of introducing foreign capital which is limited to mere agents of foreign merchandisers’.135 Park resorted to Sun Yat-sen’s proposed solution (of which he was well-aware) and interposed the state between the domestic market and foreign investors. To this end, domestic banks were nationalised. The South Korean government then took up loans abroad, and channelled the funds through the nationalised banking system, or through state guarantees, to domestic firms. This limited foreign ownership of domestic assets.136 Similarly, foreign technology was preferably purchased abroad under license for domestic firms, rather than inviting high-tech multinationals into the country. Having ensured external finance and technology, Park’s second decision was to ally himself with the discredited chaebols. ‘Mammoth enterprise’, Park conceded, were ‘considered indispensable, at the moment, to our country’. Just as in the Japanese model, exports required powerful firms able to penetrate foreign markets, and the chaebols were the only game in town. However, chaebol power also posed a challenge to Park’s own. Given their history of corruption they required a strong control mechanism if ‘mammoth economic strength’ was to be pressed into national service.137 The most powerful tool for holding chaebols

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to account was exports. By linking import permits, loans and regulatory benevolence to export success, Park provided an incentive system that pressured Korean firms to become competitive in world markets, even while they remained shielded by import barriers at home.138 Similar forces were at work during Taiwan’s pivot towards exports. The phasing out of US aid in favour of loans in the early 1960s put the territory’s gigantic military budget in jeopardy and strengthened the hand of reform-oriented technocrats within the Kuomintang. Once again, concerns surrounding the balance of payments were crucial. If imports needed for military preparedness were to continue in the absence of US aid, the required foreign currency could only be collected through loans or exports. Prolonged dependence on loans was anathema to the technocrats, as it ran counter to their aim of an ‘independent and self-sustained economy’. In addition, technocrats realised exports could be more than just the lesser of two evils. Just as in South Korea, they resented the inefficiency and corruption of domestic firms operating in a sheltered market and saw export discipline as a way to curb wasteful corporate practices. This concern was heightened by the extremely small size of the island’s domestic market, which had led import substitution strategies to their limits by the late 1950s.139 In light of such fundamental pressures, it is tempting to bestow upon Taiwan’s policy pivot the aura of inevitability. This would be premature. Similar forces were at work in many developing economies in the postwar decades, including Latin America and sub-Saharan Africa: exhaustion of small domestic markets, inefficiency of sheltered firms, concerns about the balance of payments and the need for foreign exchange. In fact, the attempted solution in all these regions was also similar, namely the resort to regional integration (Sections 6.2, 6.3). Yet whereas Prebisch and Nkrumah had built on continental solidarity, Chiang Kai-shek built on the financial interest of Japanese investors, just as Park was doing in South Korea. What made Asian integration proficient where other efforts floundered was not only Japan’s growing financial prowess (and the lack of effective opposition to integration within autocratic South Korea and Taiwan), but also the role of the United States. US pressure forged economic links between East Asia’s capitalist economies, both to build their resilience to communism and to limit its own aid commitments. As long as US military muscle underwrote Japanese, Korean and Taiwanese security, American wishes for regional integration were not easily ignored. This was crucial in facilitating the East Asian export turn.140 This does not mean that the Taiwanese turn towards exporting was masterminded by American strategists. Local traditions mattered too, and these were favourable. Chinese economic nationalism, of which the Kuomintang was the direct heir, was built on mercantilist notions of pushing overseas trade. Sun Yat-sen’s writings, moreover, offered a blueprint of a ‘developmental’ state that would manage integration into the world economy on its own terms. Sun’s

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outlines resonated with policy in Taiwan in the 1960s, which prioritised infrastructure investments and the attraction of foreign direct investment in special export processing zones. Moreover, the state on Taiwan played a strong role in maintaining import barriers and in steering foreign investment as Sun had proposed.141 The latter was accomplished through regulatory interventions and the tax code, which induced foreign investors to utilise local manpower and materials. In its detail, of course, Taiwanese protectionism was more sophisticated than Sun’s rather roughly hewn ideas. Just as in Japan and South Korea, successful exporters received tariff rebates, which limited the negative effect of import protection on production costs. Similarly, multinational companies based on the island were obliged by the Taiwanese authorities to export their products, rather than sell locally. This assured the benefits of foreign exchange earnings, while still protecting local firms from competition.142

6.4.3 Stage Three: Exports and National Growth Around ten years after their countries’ outward turn, policymakers in capitalist East Asia revised their approach to exports. Having witnessed the impressive economic growth generated during this decade, they ceased to see exports as merely a source of foreign currency earnings. Instead, they started to understand exports as a driver of economic development. The objective of economic nationalists shifted from safeguarding self-reliance to boosting growth, that is from isolation squarely to expansion. Leaders’ fixation with economic growth went beyond mundane attempts to raise living standards. Catching up with the West was understood as a national project, one that required broad mobilisation of society’s resources, or as Japanese commentators called it, ‘comprehensive national power’. This could be accomplished through close links between the state and businesses, which complemented and increasingly supplanted formal restrictions on trade and foreign investment.143 In Japan, 1960 was a watershed year. Following widespread protests against the revision of the USA-Japan security treaty, Kishi Nobusuke was forced to resign as prime minister. While the roots of popular opposition to the treaty were complex, Kishi had regarded the pact as a step towards the re-insertion of Japan into great power politics. He had campaigned in parallel to rewrite Japan’s pacifist constitution and permit greater military capabilities. This raised the spectre of a revival of Japan’s military-industrial complex (given Kishi’s wartime past, this fear may not have been unfounded). The protests and Kishi’s ignominious exit shelved any prospect of linking Japan’s industrial recovery to rearmament. It also decapitated the ‘reform bureaucrats’ and their traditional focus on economic independence. Kishi’s successor as prime minister, Ikeda Hayato (1899–1965), eschewed geopolitical entanglements and reoriented Japanese policy squarely to economic growth. While in the early

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1950s, ‘self-sufficiency’ had been the main goal, the focus now turned to a ‘peaceful race’ or ‘a competition for the economic growth rate and the promotion of productivity’. Immediately after taking office in 1960, Ikeda launched his ambitious ‘National Income Doubling Plan’ which set out to achieve its goal in a single decade. This was more than just a punchy headline to shore up the legitimacy of the governing LDP (although after Kishi’s fiasco, this was much needed). It was a detailed economic investment plan that reoriented Japanese economic policy towards a single goal, with the growth rate becoming the ultimate metric of national success. In this plan, exports would play a key role in driving growth and government measures would help to drive exports.144 Carrying out the fine print of Ikeda’s ‘National Income Doubling Plan’ therefore still left plenty of room for Kishi’s old hands at MITI. It would keep their system of export incentives from the 1950s largely in place, but it did require important adjustments. First, a decade of growth had increased the influence of the keiretsu and there could be no question now of dictating policy to the powerful private sector. Second, Japan’s formal import barriers needed to be dismantled after 1960, both because of US pressure and because businesses increasingly viewed them as obstructive red tape. The bureaucrats now saw the writing of another forced ‘opening’ of Japan on the wall. Their solution to both problems was to build a partnership with the private sector. Under the system of ‘administrative guidance’, bureaucrats would form extensive, often informal, networks with keiretsu. They provided information on government priorities and support programmes in exchange for policy compliance from businesses. For the remainder, Japanese firms would police markets themselves, often through powerful business associations. These associations provided a convenient point of communication between MITI and the private sector, and facilitated coordination among firms. Moreover, the sheer size of the keiretsu would allow them to easily withstand foreign competition. Despite official import liberalisation in the early 1960s, privatised protection contained the feared flood of foreign products.145 MITI took a similar approach to managing foreign direct investment. Until reforms in 1968, MITI officials had almost complete discretion over which multinational firms were permitted to operate in Japan. Unsurprisingly, they issued permits extremely sparingly. Exceptions were made only if multinationals were in possession of essential technology, in which case a joint venture was agreed to limit foreign exposure. In the mid-1960s, pressure started to build both from the United States and from Japanese businesses for reform. After a lengthy delaying action, MITI once again privatised protection. Pre-empting the upcoming liberalisation, MITI encouraged extensive cross-holdings between Japanese firms. Interlocking directorates and entangled webs of shareholding effectively eliminated the possibility that smaller Japanese firms would be picked off by a hostile foreign takeover. MITI also convinced

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businesses to rewrite their corporate statutes to limit the voting rights of any foreign directors. Despite formal liberalisation, foreign ownership of Japanese corporate assets therefore remained rare until the 1980s.146 While Japan’s fixation on growth in the 1960s was associated with ‘peaceful competition’, South Korea’s big push in the 1970s was driven by preparation for war. Once again, shifts in American policy precipitated that change. Announcements by the United States that it would reduce its troop commitments to the Korean peninsula within five years shocked the South Korean leadership. Park now resolved that ‘steel is national power’. Only industrial self-sufficiency, especially in military hardware, could save the country from annihilation by the communist North. Openly donning the traditional mantle of ‘rich country, strong army’ (already well-worn by nineteenth-century Japanese and Chinese nationalists), Park put in place a far-reaching plan for heavy industrialisation. It relied on accelerated public investment, state-owned enterprises and sector-specific production targets in steel and chemicals. As Park’s goal was the creation of import-competing industries, he maintained high import barriers. At the same time, industrialisation once more heightened the need for pushing exports – this time to pay for the import of modern capital equipment.147 While there was therefore no switch from self-reliance to growth, as there had been in Japan, growth was paramount to Park. This was not only because he linked growth to military preparedness. Like the Japanese LDP, he also faced increasing challenges to his rule. Park’s policy of forced openness was unpopular, and opposition candidates made headways at the (partially free) polls in 1971. Repression alone, although ramped up dramatically in the 1970s, did not provide a secure basis for rule. Fast-paced growth, on the other hand, could provide Park with the legitimacy his regime lacked. This was the motto of the new Yushin (‘renewal’) dictatorship which Park imposed in 1972, once more explicitly echoing the slogan of Japan’s Meiji ‘restoration’.148 And central for renewal and growth, Park judged after a decade of experience, were exports by private businesses. The chaebols therefore continued to be supported by Park, and their exporting success was richly rewarded.149 Economic liberalisation went furthest in Taiwan. The reason for this was primarily political. By the late 1960s, the Kuomintang had been exiled from the mainland for two decades, and the legal fiction that their Republic of China represented the sole government of China was by now exactly that: a fiction. As the communist People’s Republic of China took the Republic of China’s seat on the UN Security Council in 1971, the state on Taiwan rapidly lost international recognition. This diplomatic debacle threatened a loss of external support and aid, which presented a crucial security threat. In response, the government opened its door to foreign investment, hoping that the presence of foreign assets on the island would give other powers a stake in the territory’s defence in case of a mainland attack. Diplomatic derecognition also dealt a body blow to

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the Kuomintang’s political legitimacy. As in Japan and South Korea, the government in Taiwan compensated for a lack of legitimacy by adopting an export-led high growth strategy. Locked into perpetual competition with the isolationist mainland, this would at least offer the Republic a chance to demonstrate the superiority of its economic model. After Mao had accused the Kuomintang of abandoning Sun Yat-sen’s economics in the 1930s, it was now the Nationalists’ opportunity to return the favour. Economic openness and growth, remarked Li Kuo-ting (1910–2001), the key policy maker in Taiwan in the 1960s and 1970s, marked the transition from ‘immature nationalism’ to ‘mature nationalism’. The Kuomintang therefore increasingly took its cue from Ikeda’s ‘National Income Doubling Plan’ in Japan, and emphasised private business activity within indicative targets set by the government.150 Yet policy on Taiwan did not abandon all traces of ‘immature nationalism’ (in this aspect, too, it was faithful to Japan’s example). Despite liberalising the letter of the law in the 1970s, Taiwanese authorities retained substantial discretionary power over granting licenses to foreign investors. In addition, there were disguised import barriers. For example, importers were often required to furnish written proof that the desired product was not available from local producers. As this no-objection-certificate was to be supplied by local producers, protection was in effect privatised. Moreover, the state did not withdraw completely from import-substitution. As in South Korea, the perceived diminution of the US-backed security guarantee brought about a resurgence of investment in domestic industry, in particular in the island’s military-industrial complex. This mechanism could be used for civilian ends too. Taiwan’s efforts at establishing an advanced semiconductor industry after 1974 relied heavily on state support, although this was paired with foreign private investment. In semiconductors, however, funding from abroad did not present a dilemma even to ‘immature’ nationalists, as much of it came from overseas Chinese investors.151

6.4.4 Stage Four: The Limits of the Nationalist Exporting State The developmental state in East Asia is a rare beast among nationalist creatures in that it seems to have achieved its main goal – raising the growth rate. In retrospect, the decisions by Ikeda, Chiang and Park to bank on export-led expansion seem vindicated. This has provided East Asian policy makers with an aura of omniscience. Yet even a decade before this illusion was shattered – or at least rudely dented – by the financial crises of 1991/1997, deep cracks had already started to appear in the edifice. These fissures offer clues that the developmental state was never the hegemonic creation it claimed to be. The focus here is not primarily on the way dynamic state-business relations eventually ossified into crony capitalism. The focus is on the tensions faced by a nationalist exporting state.152

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A primary justification for exports was their role in spurring catch-up growth. But could growth be a national project if wages stagnated and only small groups of favoured capitalists profited? Such tension created dissent. In Japan, the dominant intellectual current for much of the postwar period were not nationalist intellectuals, but Marxian thinkers criticising the country’s ‘monopoly capitalism’. South Korea’s polarisation of wealth on the eve of Park’s 1961 coup made it susceptible to populist agitation. The fact that the majority of the population were denied a voice in South Korea and Taiwan until the 1980s, despite rising GDP, casts this economic inequality into sharper relief. It should therefore be no surprise that a populist opposition emerged in South Korea building on the minjung (‘the people’) movement, which clashed in the 1980s with Park’s successors. Minjung opposed the corporate privilege, inequality and authoritarianism that were the legacy of the Yushin-state.153 They were not only populists, but also nationalists (although with a left-wing slant). Many minjung were radicalised students who resented South Korean politicians and corporate executives not only for their riches, but also for having ‘sold out’ the project of national development. They complained that elites had opened the country to the Japanese (always highly unpopular) and to American creditors (rapidly becoming equally resented).154 The following anti-Park pamphlet penned by protesting students offers a glimpse of the populist economic nationalism marking this opposition in South Korea: The military dictatorship . . . which is based on anti-national comprador capitalism, disregarded the desperate national aspiration to a self-reliant national economy, and blindly pursued a foreign-dependent and exportoriented economic growth policy which forced workers and farmers to suffer low wages and low agricultural prices.155

The Korean minjung movement and its affiliates therefore show the inherent tension of a state claiming the national mantle while also maintaining exports and taking up foreign loans. Openness always comes at a cost to nationalists and in Korea not all were willing to pay it, especially not if the costs were unequally distributed. Similar backlashes, though with varying intensities and contexts, are apparent in the other two polities too. In Taiwan, the nationalism of the Kuomintang was focused on China, and forging economic relations with Chinese businesses overseas was one of its priorities. In the 1980s, this increasingly included investment in mainland China. After political liberalisation on the island, however, such links were contested by opposition movements promoting a distinct Taiwanese identity. When such movements veered into Taiwanese nationalism, they saw little value in promoting connections with the Chinese mainland (which was ‘foreign’ to them). Rather, they were fearful of the dangers to island security arising from Taiwanese investment in China proper and stressed the advantages of a self-reliant island economy. Here too, an alternative form of

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nationalism, one rooted in local identity, challenged the dominant narrative of the state the Kuomintang had created.156 The subordinate position of Japan in international relations, especially in dealings with the United States, could provoke opposition from conservative nationalists. Ishihara Shintarō (1932–2022), who would become the longserving xenophobic governor of Tokyo in the 2000s, captured his country’s imagination in 1989 with The Japan That Can Say No, a plea for an assertive Japanese foreign and economic policy. It was a reminder that Ikeda’s decision to refocus the nationalist project away from great power politics unto economic growth was not without dissent from those who preferred the traditional melange of ‘wealth and power’.157 Ishihara’s dissent also illustrates a final, and possibly lethal, problem facing the nationalist exporter. Ishihara’s writing in the 1980s was in part a reaction to hardening attitudes towards Japan in the United States. As Japanese economic ascent continued seemingly unabated, and its products penetrated the US market, it triggered intense protectionist reactions. The traditionally interventionist stance of the Japanese government only heightened American perceptions that the nation was losing out on a tilted playing field. With the Cold War winding down, there was little to restrain American protectionist impulses. Reactions in the United States ranged from rhetorical ‘Japan Bashing’ to the institution of trade barriers (including the so-called ‘voluntary export restraints’ impressed upon Japanese car exporters). Korean and Taiwanese export successes triggered similar, though obviously much smaller, reactions. American policy mattered because all three states, despite their quest for selfreliance, were heavily dependent on the US market. The nature of the East Asian exporting state was built on pushing wares abroad, but its success at doing so risked undermining its very foundation. In this instance, the flaring tensions were cooled down by the anticlimactic fizzling out of Japan’s economy in the early 1990s. ‘Japan Bashing’ became a historical footnote to the seemingly uninterrupted march of American postwar liberalism.158 But the drama of reactive American protectionism would repeat itself, with China in the role of a much bigger Asian export economy, in the 2010s (Section 8.5).

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7 The Incomplete Building of a Global Economy, 1979–2001

7.1 Introduction The 1980s and 1990s may well go down in history as the gilded age of the twentieth century, the apogee of liberal globalisation. The state-led economic models of the 1950s and 1960s had either run their course, or been ground to a halt in a cycle of low growth, external imbalances and mounting debt. Across the globe, developmentalist or socialist regimes were broken up, protected markets liberalised and the regulatory role of the state downsized. This facilitated the emergence of integrated financial markets, dynamic multinational corporations, and powerful supranational lenders such as the International Monetary Fund (IMF). Rather than markets being governed by emerging nation-states, governments in the Global South now responded to private actors and supranational institutions. As had been the case during the first globalisation in the nineteenth century, technological change facilitated global exchange. Accelerated innovation in information, communication and transportation technologies encouraged the formation of agile modular production units that could relocate quickly in response to changes in local wages, taxes or other production costs. Although private multinationals grew, this need for agility made the large state-protected or state-owned conglomerates of the past seem cumbersome and outdated. Similar technological innovations multiplied the speed at which financial markets could shift capital from one country to the next. This made capital controls harder to maintain and delimited the policy options for governments wishing to preserve their access to credit.1 The standard solutions to the Nationalist Dilemma, such as using the state to manage foreign investment, became ostensibly harder to realise. Three momentous events seem to confirm the victory of liberal globalisation during this period. First, the dissolution of the Soviet Union led to the breakup of the world’s largest centrally planned economy. This enabled the creation of fifteen new states, some of whom eventually joined western-led institutions such as the European Union (EU) and the World Trade Organization (WTO). The second event is the ‘opening’ of China after 1978. China had been isolated 223

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since Mao’s push for self-sufficiency in the 1950s (and arguably since the Kuomintang policies of the late 1930s). Its opening allowed the world’s most populous country to participate in the global economy. Third, it was not only socialist institutions that were now discredited; leading exponents of capitalist economic nationalism suffered a similar fate. The Japanese economy was in depression after 1991 and the Asian financial crisis of 1997 heavily impacted South Korea. This discredited the Asian developmental model, and raised doubts whether this approach could continue to serve as an alternative to liberal globalisation. Nonetheless, economic nationalism persisted. Neither were isolationist impulses dead, nor attempts by nationalists to shape globalisation in their image. Nationalists adapted and leveraged ‘liberal’ economic policy to achieve their expansionist ends. They embraced exports and foreign capital, seeing both as a way to steel domestic enterprises in the fire of international competition. A closer study of the dissolution of the Soviet Union, the opening of China and the developmental state in South-East Asia reveals the picture of a fragmented globalisation – at once hyper-competitive and intensely politicised. The break-up of the Soviet Union was, at a very fundamental level, a product of economic nationalism. The Union broke up because people and leaders in its constituent republics believed that they would be better off if their territory attained political, but also economic, sovereignty. Moreover, the Union’s disintegration did not usher in an age of free exchange across Eurasia, but a contested geoeconomic space inhabited by feuding new states. The story of China’s opening is similarly not about the abandonment of nationalism, but about the shift from one form of economic nationalism to another. Under Deng Xiaoping (1904–97), China transitioned from Maoist isolation to a more expansionist version closely aligned with older dreams of national ‘wealth and power’. Finally, the case of Malaysia reveals how nationalists such as Mahathir Mohamad (1924–) nevertheless attempted to propel development by adhering to variants of the Asian export-led growth model. Mahathir hoped to effect this not primarily through state regulation, but by privatising state assets to a select class of ethnic Malay entrepreneurs. The motivation to pursue economic catch-up was as much alive at the turn of the millennium as it had been a century earlier. The receding importance of explicit protection by central states also obscures that protection often took place at other levels. For one, corporations played an increasing role in ‘protecting’ the national economy. This puts national champions, be they Russian oil companies, Chinese state-owned enterprises or Malay-owned investment funds back into the picture. Moreover, informal ethnic networks became a salient mechanism for allocating resources. Such networks played a dominant role in the years of the Soviet breakup. Ethnic Chinese business networks in South-East Asia also helped reformers in mainland China to raise capital abroad. (On the other hand, the

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alleged exclusiveness of these networks was attacked vigorously by Malay nationalists.) Finally, the retreat of the central state opened up spaces for protectionist policy to be conducted at a provincial level. This occurred during both the Chinese and Soviet reform processes. In the latter case, these ‘provinces’ became fully fledged independent states, and took their protectionism to the level of the international system.

7.2 Separatism and the Breakup of the Soviet Economy For most of the twentieth century, the heartland of the vast Eurasian region was dominated by the closed economy of the Soviet Union. The disintegration of the Union changed this. Instead of one isolated economic block, fifteen independent states emerged. Yet the Soviet breakup did not result in unmitigated free exchange taking hold between Vladivostok and Riga in the 1990s. While the newly independent states of the Baltic rim sought free trade with the West, they erected trade barriers against the other former Soviet republics. Many republics in Central Asia chose integration with Russia, at the cost of freer trade with the West (or China). Finally, Ukraine and some smaller states in the Caucasus were forced into a high degree of isolation with regard to any partner.2 The appearance of high borders across the region in the 1990s, in principle, should not have come as a surprise. The governments of the new states were heirs to separatist movements. These had been campaigning for years against the forced integration of their homelands into the Soviet Union and its economy. Their protectionism was a reaction to the unequal exchange arranged by Soviet rulers over the past seventy years. Akin to the classic nationalists of India, Egypt or China who protested against the economic ‘drain’ effected by imperial Britain in 1890 (Section 4.4), the separatism of Ukrainian, Georgian and Estonian nationalists in 1990 was fuelled by economic grievances against Moscow.3 Naturally, both systems of ‘imperial’ rule were quite different. Soviet control did not involve an opening to world markets as British rule had done. Soviet republics were isolated from world markets, but instead linked tightly together in a web of interlinking production chains. The power to plan and command this economic exchange was centralised in Moscow. This arrangement multiplied existing ethnic and historical grievances in the republics. Local nationalists therefore saw the Soviet economy as a thinly disguised creation of Russian imperialism that had been exploiting their republics, leaving them as dependent ‘colonies’.4 The Nationalist Dilemma had its bearing on the separatist movements of the Soviet Union too. Cutting ties with the Soviet Union and Russia involved painful economic adjustments for the republics, owing to their dependence on the largest economy in the region. Growth and expansion were therefore better served by maintaining the existing interrepublican trade system. This problem,

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of course, applies more generally to separatist movements – the objective of ‘full’ independence requires cutting connections with the former metropolis, which is exactly the country with which economic links have been developed most extensively. What determined the balance post-Soviet governments struck between these two conflicting objectives depended on the value they attached to independence and growth respectively. This was largely a function of the historic strength of their nationalist movements. Those who could hark back to past glories of independent nationhood found it easier to mobilise populations to defend ‘economic sovereignty’ and bear the costs of disintegration.5 In the post-Soviet world, there was one additional factor that changed the Dilemma’s operation. For the western-most republics, isolation from the post-Soviet sphere did not imply an economic loss in the long run. The Baltic countries who were eventually able to integrate with the European Union attained a much higher GDP in the new millennium than those who did not. The Baltic isolationists squared the circle: they attained their desired economic independence from Moscow, while also enhancing growth prospects by integrating with the West. They could do this because their isolationist impulse was not general, as it had been for countries such as Ghana or Tanzania after decolonisation (Section 6.3). Rather, protection was directed specifically against Russia. Yet this silver bullet was not available to others in the 1990s. Ukraine was too large to be given the prospect of joining the European Union, the countries of the Caucasus and Moldova too riddled with conflict, and those in Central Asia too remote from Western markets. For politicians in these countries, the trade-off between wealth and independence remained as sharp as ever. As the 1990s drew to a close, an increasingly aggressive Russian foreign policy used its control over trade and energy links to ensure that it stayed that way.6 *

The seclusion of the Soviet economy was not primarily the product of purposeful nationalism. Soviet leaders since the 1960s had preached the benefits of exchange with other socialist countries and subsidised their satellite states in East-Central Europe through cheapened oil and gas exports. If necessity demanded it, Soviet planners even established trade with capitalist markets, selling Soviet oil and gas in exchange for Western technology and American wheat. In their grudging acceptance of international trade, Soviet leaders after Stalin differed from their communist colleague Mao Zedong, who explicitly pursued policies of autarky in China (Section 7.3).7 What held back Soviet trade, at least during the thawing periods of the Cold War, was not necessarily isolation for its own sake, but the institutions of planning. Trade needed to fit into rigid production plans, which proved

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difficult given the inherent unpredictability of world markets. Moreover, planning did not know market prices and convertible currencies, while world trade could be conducted according to no other yardstick. Soviet economists drew-up intricate state-run trade institutions, shadow prices and barter agreements to cope with these problems, but international trade always remained subdued.8 Soviet planners faced no such official barriers to trade domestically. Planning provided Moscow, at least in theory, with almost-complete control over the production, transport and distribution of all goods in the USSR. As transport costs were rarely factored into their calculations, planners did not hesitate to make use of their power to establish production chains that spanned the entirety of the Union’s territory. In addition, Soviet planners were devout believers in the productive powers of monopoly enterprises (a reflection of their Marxist heritage). They therefore tended to concentrate the production of each component in one single factory. As the production of components was spread around the Union, assembling any final product inevitably demanded high levels of exchange between the Union’s fifteen republics. Economic integration was therefore not primarily a political project for planners. They followed the requirements of efficiency (or rather their version of it), instead of attempting to weave a common Soviet nation through economic integration.9 Politically, Soviet leaders made attempts at Soviet nation-building, but at the same time acknowledged the existence of many different nationalities within the USSR. The most important of these were the ‘titular’ nationalities of the fifteen Union Republics: Ukrainians, Georgians, Uzbeks and others. Each ‘titular’ nationality had its own recognised national language and its members were accorded privileges within ‘their’ republic. This included preferential appointment to local Party and bureaucratic posts. Some of this accommodation with local nationalities was a legacy of the Russian Civil War (1917–20), when Bolshevik power had been contested and Lenin had been forced to ally himself with nationalists in the periphery of the old Tsarist Empire. More prosaically, tolerating ethnic diversity was beneficial for propaganda purposes, as it allowed the Soviets to align themselves with anti-imperialist movements globally. The USSR was therefore, as proclaimed in its anthem, officially ‘an unbreakable Union of free republics’.10 Yet Lenin’s lofty promises (and the tune of ‘free republics’) sounded hollow against the horror of Stalin’s purges in the 1930s, or even against the less grim but equally determined economic bureaucrats who became his successors. The requirements of central planning left little room for local idiosyncrasies and most economic institutions in the republics were demoted to transmission belts for commands from Moscow. The Soviet Union therefore created one of the most peculiar federal systems in the world. It provided local nationalities with official recognition and the trappings of statehood, replete with flags, ministries and constitutions. At the same time, the Union centralised

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economic control and rode roughshod over local demands. For the local intelligentsia, their own lack of power led them to blame the myriad inequities they experienced on Moscow’s central control. Meanwhile, the federalised institutions available to local elites led them to structure their opposition to Moscow in ethno-nationalist terms.11 Given the distorted system of Soviet resource allocation, potential separatists indeed had no shortage of complaints. As gargantuan Soviet investment projects transformed landscapes and communities, environmental concerns played an increasing role in fuelling local discontent by the mid-1980s. Soviet cultivation of cotton in Uzbekistan diverted rivers and accelerated the formation of deserts. Mining and shale oil extraction in Estonia scarred the Baltic coastline. Reckless operation of the Chernobyl nuclear power plant exacted a staggering toll on the people and natural environment of northern Ukraine and southern Belarus. Protests against these projects took off because environmental problems were often viewed through nationalist lenses. Soviet exploitation of local resources accentuated the ‘colonial’ nature of the relationship between the republics and Moscow, with local nationalists complaining that their republics were being reduced to suppliers of raw materials for ‘Russian’ industry. Local resources and the natural environment were therefore increasingly seen as ‘national’ treasures that should not be surrendered easily to outsiders.12 This aspect was reinforced by the fact that Soviet investment usually triggered a corresponding inflow of Russian-speaking technicians and managers. This demographic shift raised the spectre of ‘russification’ that alarmed Lithuanian, Latvian and Estonian nationalists. In Central Asia, ethnic tensions also came to the fore. Local education levels in the region were lower than elsewhere in the Union, so that an ethnic division of labour emerged where the majority of skilled occupations were dominated by ethnic Russian immigrants. Given that the provision of education and jobs could be blamed directly on decision-makers in Moscow, it was easy to cast these economic inequalities as a deliberate ‘Russian’ ploy to exploit local nationalities.13 Ironically, if there was one thing Russian and republican nationalists had in common, it was the feeling of being exploited by the Soviet Union. Russians could point to the system of direct fiscal transfers which made the largest economy of the Union – Russia – a net contributor to the less developed republics in Central Asia. Adding insult to injury, Russia was also a net payer in indirect subsidies. These arose because the official prices at which goods were exchanged within the Union undervalued Russian exports, mainly oil and gas. Reversely, Russian imports, such as light manufactures from Belarus or the Baltics, were overpriced. Russia was therefore subsidising consumers of energy in the remainder of the Union – a subsidy that was costly given the high price hydrocarbons could have fetched on world markets. If the Soviet Union was indeed an empire, it was exacting a cost on its most populous state that even many Russian nationalists were no longer willing to bear.14

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The same considerations also incited unrest among other producers of hydrocarbons, such as Azerbaijan or Kazakhstan. Reversely, the fact that the Baltic states and Ukraine as energy consumers were net recipients of indirect subsidies did little to dampen their separatism. Ukrainians could point to their republic’s exports of food to Russia, which were also under-priced. In the end, the exact magnitude of net subsidies or trade balances did not matter. Neither of these could be ascertained with much certainty. They were hidden beneath the intricacies of Soviet accounting practices and within the esoteric rule-work of an opaque planning system.15 What mattered was that separatists could always point to at least one dimension of interrepublican economic relations on which their own nation was subjected to ‘exploitation’, be it as an exporter of hydrocarbons or foods, as a victim of environmental degradation or as a destination of immigration for Russian workers. Local economic nationalisms were therefore an instinctive reaction to experienced inequities and did not rely on a codified body of theory. Whereas Russian nationalists of the Tsarist era, such as Sergei Witte (Section 4.5), had read List in detail, any explicit elaboration of nationalist theory was taboo in the Soviet Union. Marx had criticised List’s writings for being ‘bourgeois’ and Soviet leaders were keen to adhere to Marxist orthodoxy (more so than the eclectic socialists of the developing world). This pushed nationalist discourse into the underground, into the realm of pamphlets and dissident literature. The precise content of these ideologies was determined by local perceptions of the Soviet system. When nationalists drew on a theoretical system, they resorted to the only one they had access to: Marxism and Leninism. As it had been for the African socialist Nkrumah, Lenin’s theory of imperialism became a particularly fruitful source for conceptualising unequal exchange (Section 6.3). Hence came the tendency by local nationalists in the late Soviet Union to see economic relations in terms of imperialist ‘exploitation’ and colonial subjugation.16 Lenin’s work, intended as a broadside against the capitalist relations imposed on the colonised world before World War I, thus became a weapon directed against the socialist economic system itself. For most of Soviet history, political repression stopped this weapon from detonating. Active opposition to Soviet rule was rare, because the penalties were steep. However, this did not stop national elites in the republics from covertly changing economic relations in their favour. Elites could do this because they had slowly gained ground in local bureaucracies as repression abated following Stalin’s death in 1953. As the tenure of local bureaucrats had become more secure, informal networks, often running along ethnic or clan affiliations, solidified in the Union republics. By the 1980s, even the most determined anti-corruption campaigns by Soviet central authorities could not cut through the by now entrenched systems of favouritism. Ethnic networks thus became powerful competitors to the state in the allocation and

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distribution of resources. These networks could be used to dish out jobs, administrative favours and scarce goods to co-nationals. Georgia became noted as a particular hotspot for bureaucratic corruption and kinship networks. In Uzbekistan, a cartel of republican leaders successfully manipulated the cotton trade for decades to the detriment of the central authorities in Moscow.17 These schemes worked because nationalist aims and personal enrichment coincided. Ethnic networks and associated codes of silence eased the siphoning of products from the official into the underground economy. There they could be profitably exchanged for other scarce goods. The fact that this act removed resources from the jurisdiction of despised Moscow planners further solidified the networks of co-nationals.18 The first complaints that such ‘economic patriotism’ by republican elites hindered the flow of goods across inner-Union borders stem from the 1960s. At this early stage, local protectionism was minimal. However, the frequency of these informal barriers multiplied as the threat of repression waned during the late 1980s. Mikhail Gorbachev’s (1931-2022) more tolerant approach promised openness (glasnost) and reform (perestroika). This removed much of the penalty on nationalist activity. For the first time in Soviet history, separatist positions could now be explicitly voiced by regional leaders. In parallel, nationalist movements organised mass demonstrations airing separatist demands. Spurred by popular mobilisation, republican leaders accordingly became more assertive in political conflicts with Moscow and started to claim back authority from the centre.19 Republican leaders did so by issuing unilateral declarations of ‘sovereignty’, which were legal instruments that asserted the right for a republic to manage its internal affairs. These often included the right to ownership over natural resources and industry. Estonia led the charge for economic self-management in 1987, with a reform programme calling for local budgetary autonomy, a separate industrial policy, and restrictions on immigration into the republic. The programme was adopted a year later by the two other Baltic republics.20 These developments gave republican governments both the political backing and legal pretext to restructure economic relations. They now openly stopped the flow of goods to other regions, amplifying shortages and bottlenecks across the Union. Workers from outside a republic faced increased discrimination, reversing patterns of internal migration. Republics no longer transferred fiscal revenues to the centre, preferring to retain resources locally. Boris Yeltsin (1931–2007), the assertive new leader of Soviet Russia, was a particularly notorious offender, transmitting only a fraction of the tax revenue due to the Union government.21 Gorbachev, at the centre of the Union, was running out of resources, time and allies. As the Soviet economy disintegrated along its inner borders amid flaring social unrest, a circle of hardline Soviet military leaders staged a coup in August 1991 in a last-ditch attempt to keep the Union together by force. The coup failed spectacularly, but it

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demonstrated to republican leaders that the Union centre was now powerless. Less than four months later, Yeltsin and the leaders of Ukraine and Belarus declared the USSR to be dissolved. Gorbachev resigned before the year was out. The Soviet Union had been broken and the republics were finally free.22 Freed from Moscow’s reins, the governments of the newly independent states largely decided to continue in their isolationist stance. After the forced integration of the Soviet period, governments and the nationalists that supported them were eager to preserve ‘economic sovereignty’. This involved cutting links with Russia. Not only had the Soviet Union been seen as a Russian creation by separatists in the republics, but the newly created Russian Federation was seen as the natural successor to the Soviet state. This view mattered, because decision-makers in the new states were often the same as before independence. The old communist functionaries now donned nationalist garb, or in some cases, revealed themselves to have been nationalists all along. The policy of most former Soviet republics in the early 1990s was therefore a continuation of the late 1980s. Trade links were severed by taxing trade with the former Soviet bloc at a higher rate than trade with other regions. Migration flows also reversed, with Russians moving out of Central Asia due to ethnic conflicts and economic crises.23 Even as the purpose of policy was constant, the modalities of protection did change to adapt to the appearance of market relations. Instead of the command-and-control approach under planning, trade was now managed by the tariff barriers and quotas typical of market-based economies. Some trade barriers also arose automatically, due to the absence of institutions that could have supported market-based trade. For example, trade was hindered by the lack of a clearing mechanism that could have settled debts accrued in international trade. The transition to markets also changed the targets of protection from exports to imports. Under the old Soviet system, physical goods had a value in use, whereas the monetary payment received for them was largely fictitious. Local leaders therefore had an incentive to curtail the export of goods, behaving like mercantilists in reverse. The fall of communism turned mercantilism back on to its feet. Governments now had an incentive to restrict imports, the bill for which would otherwise need to be settled in scarce foreign exchange. The shift from export to import protection was gradual, however, and countries such as Ukraine continued to restrict the export of foods and raw materials well into the 1990s, because inter-state payments were not easily settled.24 In many policy fields, leaders could now ramp up protection even further. As newly independent states, they were able to introduce all the institutions associated with economic sovereignty, the most important of which was the introduction of a national currency to replace the ruble. This further fragmented trade relations, because many new currencies were inconvertible and could therefore not easily be used for transactions. Nonetheless, a national

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currency was an important symbol of independence. Monetary sovereignty also enabled countries to carry out a separate monetary policy from that of the Central Bank of Russia, which controlled ruble emissions. Maintaining the ruble would have implied remaining with ‘the last colonial empire in the world,’ explained Lennart Meri (1929–2006), first president of Estonia after independence. Of the country’s new currency, he said that ‘the kroon is not a piece of paper; the kroon is the flag of Estonian economic and political independence’.25 Ukrainian nationalists echoed these statements. ‘At a time when Ukraine has become an independent nation and the Union center has ceased to exist, our economy continues to be managed from afar, now through financial, monetary and pricing policies’, complained Oleksandr Yemelyanov about Russia’s control over the printing of rubles. Yemelyanov was the author of Ukraine’s 1992 ‘National Economic Policy’ programme, which would radically break off economic links with Russia, seeking to reorientate Ukrainian trade towards the West.26 Yet the initial enthusiasm for isolation soon dissipated. By 1994, the consequences of monetary fragmentation and supply chain disruptions had inflicted heavy costs on all post-Soviet economies. The difficulties were compounded by the painfully slow integration with western markets, largely due to the difficulty of quickly building up the institutions required for market-based trade. Post-Soviet countries were therefore stuck in autarky. As incomes slumped, and social unrest fermented, governments were forced to re-evaluate the dilemma. Reintegration with other post-Soviet states, in particular Russia, might reignite growth rates. This could fasten governments’ hold on increasingly fracturing societies and restore their capacity to act. As such, reintegration with Russia might consolidate the institutions of the new countries. Yet it would compromise economic sovereignty and invite dependence upon their powerful neighbour.27 It was at this point that commercial policies between the post-Soviet states started to diverge substantially. A large group of states decided to swallow the pill and reintegrate. Kazakhstan and Belarus were leading the retreat. They attempted to form a new ruble zone and signed a flurry of trade and regulatory alignment agreements with Russia in the mid-1990s. They were eventually joined by Tajikistan and Kyrgyzstan, with the five parties founding the Eurasian Economic Community (a forerunner of the Eurasian Economic Union) in the year 2000. The goal of this Community was the establishment of a jointly governed common market, although Russia retained the largest share of votes in the new institutions. The governments of the other states agreed to these terms not only because their links with Russia were deep. More salient was the lack of an alternative. Western markets were geographically distant from the Central Asian countries. China would only present itself as an alternative with its Belt and Road Initiative far into the new millennium. For the time being, Russia was the only option.28

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Questions of national identity were even more decisive. Nationalist movements within Belarus and Central Asia were weaker than elsewhere in the former Union in the 1990s. They could not look back on a long history as independent nation-states, which could have served as reference points for nationalist mobilisation. During Soviet times, many inhabitants of these countries had adopted the Russian language, especially in Belarus and Kazakhstan. National identity as a Belarusian or Kazakh was often quite compatible with residual Soviet or Eurasian identities. Few people in Belarus or Kazakhstan were therefore willing to bear the costs associated with economic isolation from Russia. Once the choice came down to one between economic sovereignty and welfare, policymakers chose the latter, and toned down their isolationism.29 The situation in Ukraine was more complicated. Ukraine had an active nationalist movement that was invested in the narrative of Ukraine as an exploited ‘internal colony’. Ukraine was the largest industrial economy in the region after Russia, nationalists pointed out, and it was a large supplier of grains to the former Union. Nonetheless, living standard were low. ‘Why is it that our people have lived on their own land for a thousand years and still have not reached the level of world civilization?’ queried Ivan Plyushch (1941– 2014), the influential Deputy-Chairman of Parliament, in 1991. The answer was Russian oppression: ‘That is because during many centuries, the Ukrainian people have never been masters of their own territory. We have always been alienated from the results of our own work.’ (We may note the use of Marxist idiom, such as alienation from the fruits of labour, to express national resistance.) Plyushch reasoned that economic independence would finally propel Ukraine forward, concluding that ‘at present our economy is not a national one. And that is the chief cause for all our misfortunes’.30 The nationalists had a large influence on Leonid Kravchuk (1934–2022), Ukraine’s first president. Kravchuk was a recently converted communist apparatchik with little track record on economic nationalism and he was therefore determined to prove his mettle. He committed himself to severing relations with the former imperial power, and exhorted his compatriots ‘by common efforts, to protect Ukraine from attempts to economically rob it’.31 Kravchuk also supported Yemelyanov’s isolationist policy programme of 1992, which slammed Russian trade with high taxes and restrictions. In addition, the programme called for the introduction of a separate currency to decouple Ukraine from the pace of monetary and pricing reforms in Russia.32 Unfortunately, the Ukrainian isolationist programme did not have the desired effect of accelerating development. Although Ukraine was a considerable industrial power, its factories were heavily dependent on Russian inputs, including energy. Given the limited marketability of Soviet legacy products in the West, Ukrainian factories were also dependent on Russian markets for their outputs. In those few sectors where Ukraine was

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internationally competitive, mainly foods and steel, European markets were themselves heavily protected. Thoroughly isolated, Ukraine therefore experienced one of the deepest slumps in the former Soviet Union. This broke open regional divisions within the country. Whereas the nationalists were strong in the western regions, which had only become Soviet territory after World War II, they were weaker in the eastern regions that had been under Moscow’s control for much longer. Much of Ukraine’s industry was located in these eastern regions, where Russian was widely spoken. Similar to Belarusians or Kazakhs, eastern Ukrainians in the 1990s did not perceive that being Ukrainian contradicted residual Soviet or Eurasian identities. They were mostly not prepared to sacrifice economic welfare for the pursuit of Ukrainian economic sovereignty. The eastern regions therefore constituted a lobby for reintegration. Some regions proceeded to negotiate directly with Russia to restore trade links. In Crimea and Donetsk talk of secession appeared. Perversely, the quest to safeguard Ukrainian sovereignty through isolation had endangered the country’s territorial integrity.33 The crisis led to the replacement of Kravchuk as Ukrainian president in 1994 by Leonid Kuchma (1938–), who promised a more conciliatory approach towards Russia. Kuchma declared that ‘Ukraine’s self-isolation and its voluntary refusal to campaign vigorously for its own interests in the Euro-Asian space [was] a serious mistake, which caused great damage, above all to the national economy’.34 Under Kuchma, some of the quotas on trade with Russia were rescinded and Ukraine took a more proactive approach to regional integration agreements. However, Ukraine never followed the path of Belarus or Kazakhstan towards full reintegration. The nationalists were still a significant force and their complete alienation would also have resulted in political instability. Russia’s aggressive strategy of withholding gas deliveries to exact Ukrainian political concessions during the ‘Energy War’ of 1993–94 also strengthened the nationalists’ case that economic dependence on Russia was dangerous. This led Kuchma, like Kravchuk before him, to resort to programmes aimed at replacing Russian imports and ‘stimulate closed cycles of cooperation’ within Ukraine.35 At the same time, Kuchma was no more successful than Kravchuk in finding alternative suppliers of energy or in opening European export markets. As a result, Ukrainian policy remained uncomfortably lodged between Western and Russian poles, with the Ukrainian economy remaining in partial autarky throughout the 1990s.36 The Baltic states were able to escape the trade-off between sovereignty and growth, at least over the long run. This was not because they were less isolationist than Ukraine; the opposite is true. The Lithuanian nationalist movement Sajūdis promoted the ideal of the national economy as a ‘unified, self-contained system’.37 Latvian policymakers were in favour of ‘recreating the integrity of the Latvian economy as a separate unit’.38 All three republics were veterans of the movement for economic autonomy in the late 1980s. They

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therefore implemented tight restrictions on trade with Russia and rapidly introduced their own currencies once they became independent. The Lithuanian Parliament even passed a constitutional amendment forbidding the government from joining into any agreement promoting post-Soviet economic cooperation, including the Commonwealth of Independent States. Yet unlike Ukraine, the Baltic states could persist in this isolationist programme because their nationalist movements were politically more powerful. They could draw upon the longer interwar experience of independent Baltic nation-states, the restoration of which was a powerful motive. This meant that more citizens of the Baltic polities were willing to make material sacrifices for the attainment of economic sovereignty.39 That the sacrifices of the Baltic populations were not in vain was in part due to their success at market reform. But it was also due to their geographic and historical proximity to Western Europe, which facilitated economic integration. This eventual integration into European markets allowed the Baltic states to attain higher income levels, while maintaining a regime of isolation with respect to Russia. Two peculiar features of Baltic economic nationalism follow from this constellation. First, it was generally liberal, preferring alignment with European institutions of market governance rather than the heavy-handed state intervention favoured in Russia, Ukraine or Central Asia. There was thus no contradiction between nationalist and liberal policies. Second, when intervention was used, it was specifically directed against Russia as the former imperial power. Integration with the more accommodating European institutions was not seen as a threat to sovereignty. The trade policy of the Baltic states therefore taxed exchange with the East, their governments prevented the sale of industrial assets to Russian companies, and their laws forbade Russian citizens from owning land.40 While much of the reorientation away from Russia happened at the initiative of the newly independent states, Russia often accelerated this move. For example, it was Russia who stalled trade negotiations with Latvia in the early 1990s.41 While this seems puzzling at first glance, it is well-explained by the dynamics of Russian nationalism. Since he had become Russian leader in 1990, Boris Yeltsin had stressed that Russia was a net contributor to the Soviet Union, and therefore a victim of ‘colonisation’ just like the other republics. While his depiction of Russia as a victim may not have been too convincing for Ukrainians or Estonians, it struck a chord with many Russians who blamed the USSR for the country’s economic and social woes. These included a ‘drain’ on resource revenues through the export of subsidised fuels to the western republics, as well as the immigration of low-skilled workers from the Caucasian and Central Asian republics. Once disintegration accelerated, inflation was added to the list of Russian grievances, because republics who still used the ruble recklessly emitted ruble-based credits, thus creating an expansion of the money supply beyond the control of Russian monetary authorities.

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This decreased the value of the ruble and accelerated inflation. The Russian government under Yeltsin was therefore adamant in pressing for the secession of Russia from the Union. Once this was achieved in 1991, Russia took steps to isolate itself from interaction with the other post-Soviet states. Russia dismantled the remnants of the ruble zone in 1993 and let the Commonwealth of Independent States lay dormant. Yeltsin made clear he was no longer willing to bear the costs of empire.42 This sentiment built on two streams of Russian nationalist thought that were rising around 1990. First, there were those who favoured a culturally homogeneous ‘little Russia’ that would be predominantly Slavic, without admixture from the surrounding peoples of Eurasia. These racial exclusivists advocated general isolation.43 Within Yeltsin’s team of reformers, a second more liberal stream was dominant. Reformers believed that Russia’s future lay in becoming an advanced country in the West’s image. Links with the slowly developing parts of the old empire would only impede Russia’s progress towards market reforms and ultimately delay Russia’s modernisation. The reformers pressed for isolation, but only with regard to postSoviet countries and strove for integration with the West.44 In other words, the reformers wanted Russia to behave in a similar way to the Baltic states. Yet unlike the Baltics, the programme of isolating itself from the post-Soviet region did not last long in Russia. The radical market reforms of the westernising liberals did not deliver what they had promised and Russia entered a deep economic slump. This discredited the pro-Western orientation in economic policy. It also turned out that even Russia, for all its size, was not immune to the disruption of supply links. Russian industrialists, including the powerful ‘oligarchs’ who had business interests in Russia’s near-abroad, lobbied the weakened Yeltsin government for a more assertive approach to post-Soviet affairs. When Yeltsin appointed the secret service veteran Yevgeny Primakov (1929–2015) as foreign minister in 1996, the latter shifted Russian policy towards state-led reintegration. Primakov promoted economic cooperation agreements with Belarus and Kazakhstan, and strengthened Russia’s role in the region’s international institutions. This tapped into visions of Russian identity as embodying a distinct ‘Eurasian’ civilisation, with Russia as an empire rather than a nation-state. Russian economic relations should hence be predominantly with other Eurasian countries to recreate its sphere of influence. Primakov’s thrust can be compared to attempts to create a unified ‘Greater British’ empire through trade with the Britannic Dominions in the interwar period (Section 5.2).45 As with Leo Amery’s attempts to define national identity so expansively, Primakov’s vision did similarly run into problems with more narrowly defined national interests. The countries most willing to cooperate with Russia were in the Caucasus and Central Asia, but immigration from non-Slavic countries continued to be unpopular in Russia, partly on racialist grounds. The cost of subsidising energy exports to regional allies remained substantial given prices in international oil markets. Finally, the

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common external tariff required for the creation of a common market with neighbouring countries such as Belarus and Kazakhstan reduced Russia’s share of customs revenue at a time when the Russian budget was under continuous pressure. In general, expansionism stretched the rather meagre capabilities of the Russian state in the 1990s.46 It was left to another former KGB officer, Vladimir Putin, to pursue Russia’s Eurasian ambitions once he became prime minister in 1999 and won the presidential elections one year later. Putin broadly agreed with Primakov’s Eurasianism, but he acknowledged the limited capacity of the Russian state, which was hamstrung by a feeble economy. This realisation led Putin to embrace expansionist economic nationalism in the first decade of his presidency. In his first address to the Duma as president in July 2000 he complained that ‘the growing gap between leading nations and Russia pushes us towards becoming a third world country. The figures of current economic growth should not be any cause for comfort: we continue to live in conditions of progressing economic lag’.47 His priority was therefore to close this gap, and subsequently enhance Russia’s geopolitical role. He attempted to do this in three ways. First, Putin borrowed from the playbook of Yeltsin’s reformers and accepted the need for Western technology and investment in Russia’s modernisation. He rejected the need for tariff protection and emphasised engagement with the international economy. This was the liberal plank in Putin’s platform. It was, however, a liberal means towards a nationalist end: increasing Russian economic growth and therefore power. Simultaneously, Putin retained isolationist instincts, especially when it came to integration with the West.48 He made this explicit in the same speech, when he criticised the liberals’ unconditional acceptance of Western aid and ideas during the 1990s: For a long time we have been trying to make the choice: to rely on others’ advice, aid and loans, or to develop relying on our own distinctive character and own efforts. Many countries have also faced this choice. If Russia remains weak, we really will have to make the former choice. And it will be the choice of a weak state. It will be the choice of the weak. The only real choice for Russia is the choice of a strong country.49

In well-trodden nationalist tradition, a ‘strong’ state would thus make sure that integration with the West did not erode Russian autonomy. This statism was Putin’s second plank. The third plank was the development of Russia’s ‘own efforts’, which for Putin translated into a strategic use of natural resources. This much can be learned from a brief academic article Putin had published one year earlier, where he laid out his ideas ‘for Russia’s exit from its deep crisis and restoration of its former might’.50 In order to ‘make Russia a great economic power with a high living standard for the majority of the population’, the state should provide ‘maximum support for the fatherland’s

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processing industry based on the extractive complex’.51 State involvement was important, because the resource sector, if left to its own devices, would not fulfil its obligation to Russia’s ‘economic security’, fiscal needs and ‘geopolitical interests’.52 At the time, Putin did not advocate a full-blown nationalisation of the oil and gas sector, but he did want the state to nurture national champions that ‘will be capable of competing on equal terms with Western multinational corporations’.53 Hydrocarbon profits would open up a lucrative revenue source for the government (and, as it would turn out, those cronies close to it).54 During the 2000s, economic growth and state-led resource companies provided the levers and funds for Putin to play the domineering role in post-Soviet affairs that Primakov could not. However, Russia’s military intervention in Georgia (2008) and especially its murderous war against Ukraine (2014–) also unleashed crippling Western sanctions that undermined the first plank of Putin’s platform, access to Western technology. Moreover, military adventuring hardly served the goal of fostering economic cooperation in the region. Russia thus chose to pursue isolation once again and strengthening the country’s ‘economic security’ through import substitution becoming the core of Putin’s commercial policy after 2014. The largest country in the world remains disconnected from globalisation.55

7.3 The Advent of ‘Wealth and Power’ in China In the last quarter of the twentieth century, China underwent a fundamental economic transformation. We often picture China’s reform process as one of economic liberalisation: markets were allowed to take over where once the plan had ruled. However, we can equally well understand China’s transformation as the shift from one form of economic nationalism to another. In the 1930s and 1940s, under the strain of war and boycotts, Chinese policy had shifted from the expansionist nationalism of Zheng Guanying and Sun Yat-sen to the isolationism of Chiang Kai-shek and Mao Zedong (Section 5.5). During Deng Xiaoping’s reforms of the 1980s, policy shifted back again – from isolation to ‘wealth and power’. The contest between these two strands of economic nationalism was the defining battle of Chinese economic policy.56 In understanding this momentous shift, it is helpful to recall the sequencing of opening in Japan after World War II (Section 6.4). For Japan, wartime autarky was followed by a period of carefully guarded integration. During this phase, exports were pushed to earn the hard currency required for essential imports (raw materials in the Japanese case), while barriers to most other goods remained high. A final phase saw a lowering of official import barriers, which were partially replaced by informal hurdles. More importantly, policy in this phase moved away from protecting domestic markets to focusing on growth and embracing international competition. China followed the same sequencing: Mao’s autarky of the 1950s and 1960s was followed by Deng’s

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cautious outward turn in the late 1970s and 1980s, before the full embrace of export-led growth came in the 1990s under Jiang Zemin (1926–2022). Beyond this broad similarity, the differences are also revealing. Maoist isolation did not rely on prior territorial expansion. Deng’s opening was also more revolutionary than Japanese efforts. The Chinese reformers courted foreign investment to an extent that would have made Kishi Nobusuke and his colleagues at the Japanese MITI deeply uncomfortable – and it had the same effect on many of China’s isolationist party elders, who still lived by Mao’s dictum that ‘international capitalism’ was nothing other than naked ‘imperialism’.57 The willingness of Deng Xiaoping to take such risks (both to his political position and to China’s much vaunted sovereignty) is not due to him being, in any meaningful sense, less ‘nationalist’ than Mao and the isolationists. Deng, a confidant of Mao from the days of the Long March, was as much part of the old guard of the CCP as his colleagues, and was as much steeped in memories of ‘national humiliations’ and ‘anti-imperialism’ as his compatriots. But the lesson Deng and his successor Jiang Zemin drew from this history was different: isolation was not the cure to China’s weakness, it was its cause. Only foreign learning and funds could rejuvenate China and assure the country’s rightful place among the world powers. This was, of course, exactly the same conclusion that Zheng and Sun had reached at the start of the century. National power required wealth, and this could only be had with the help of foreign capital. Yet the developmental gap between China and its peers in Deng’s days was not only greater than during Sun’s time, it was much greater than it had been for postwar Japan.58 This meant that foreign capital was needed to an even greater extent. China under Deng and Jiang therefore provides a nice illustration of the proposition that the wider the income gap between a nation and its potential competitors, the more willing nationalists are to sacrifice economic sovereignty in the pursuit of growth. China’s leaders chose a level of openness that came close to the stance pursued by Taiwan, another heir to the politics of Sun Yat-sen. Unsurprisingly, China’s mainland reformers sought inspiration not only from the successes of Taiwan’s economy, but also from once more claiming Sun’s legacy.59 It was not only the gap between China and the rest that had grown wider since Sun’s time. The world economy that Deng confronted in the 1980s presented fundamentally different challenges. Advances in transport and communication technologies gave the edge to flexible enterprises that could quickly integrate into dynamic global value chains. This limited the degree to which a slow-moving national government could ‘plan’ development in a top-down manner (like South Korea had still done a few decades earlier). China’s reformers innovated by devolving power down to the regions, whose leaders could make decisions more flexibly.60 Decentralisation would have been anathema to most strands of economic nationalism. Classic Listian thought prescribed the building of a tightly

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integrated national economy and a strong central state. Deng’s reformers, however, inherited a deeply decentralised country from Mao, and decided to use this for their own aims. They selected some coastal regions to open up to foreign investment and trade, allowing them to absorb the benefits of integration. Regions in the interior, meanwhile, would remain protected. In other words, regional fragmentation was used to mediate the Nationalist Dilemma, softening the choice between isolation and openness. As in the Soviet Union, there were costs to regional autonomy in China in terms of declining central tax collection and fragmenting domestic exchange. However, these costs were limited, because most Chinese provinces did not develop their own national separatisms. That is one crucial reason why the Chinese economy was not torn apart like that of the Soviet Union. Leaders in Beijing were willing to tolerate local autonomy because it served broader national goals.61

7.3.1 Mao’s Autarky (1950s–1975) As we have seen, Mao positioned the CCP as the vanguard of China’s defence against ‘imperialism’ in the 1930s and 1940s. This encompassed opposition to ‘international capitalism’ and Japanese aggression. It was therefore no surprise that China would turn inward once Communist power was consolidated in 1949. Yet the modalities of this turn were unclear. By his own admission, Mao’s thinking was scant on economic details, and his policies prone to radical shifts, two flaws that lay at the origin of the many disasters under his regime. On the one hand, Mao had initially urged a conciliatory policy towards the ‘national bourgeoisie’. In the early 1950s, some Chinese industrialists were accordingly permitted to retain their businesses and they assumed that ‘anti-imperialism’ would simply translate into higher tariff barriers, while leaving private property intact and export opportunities open.62 This hope proved forlorn, as Mao, under the influence of Soviet advisers, moved closer to a Stalinist model of planning with the adoption of the First Five Year Plan in 1953. As in the Soviet Union, central planning automatically acted as a barrier between the Chinese and the global economy. Yet this insulation did not go far enough for Mao, who feared that adopting the Soviet model would simply exchange dependence on Western and Japanese investors for dependence on Russian experts and supplies. Moreover, the wholesale adoption of any foreign model, even one with socialist pedigree, grated on Mao’s nationalist instincts. True self-sufficiency and an avoidance of ‘slavish dependence on foreign products’, the Chairman explained, would involve the revolutionary fervour and grassroots efforts of each and every Chinese toiler. Local initiative, Mao proclaimed, would not only entrench self-sufficiency, it would also propel China’s development forward.63 Mao thus tried to square the circle between economic isolation and expansion by building on decentralisation.

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Mao’s Great Leap Forward (1958–62) was of this spirit. On one level, it was a wildly ambitious project of catch-up growth, most concisely expressed in the goal of overtaking British steel production within fifteen years. But it was also highly unusual in eschewing the central control most experts believed necessary for the ‘Big Push’. Mao and his allies torpedoed the central planning apparatus, instead relying on district cadres, Party cells and communes to make local decisions on production. Instead of the vertically integrated steel plants economic nationalists around the world craved, Mao mobilised peasants to produce iron in backyard furnaces. This would pre-empt the need for foreign investors or technology. It was of course a hare-brained scheme: peasants producing iron could not plough fields, and few made good metallurgists. Food production plummeted, and the iron produced was mostly of scrap quality. Mao therefore managed to reproduce the casualties of forced industrialisation without the associated growth rates. This was a result of Mao’s attempt to solve the Nationalist Dilemma: his failure demonstrated that decentralisation alone could not ensure the development of a poor and technologically backward country like China as long as it remained isolated.64 Mao remained unwilling to compromise on self-sufficiency, even after the disaster of the Great Leap Forward. In fact, his commitment to isolation and decentralisation hardened after the Soviet Union, disaffected by Mao’s uncompromising stance, withdrew its advisers and aid in 1960. China now found itself virtually without economic partners or allies, a situation that further heightened Mao’s paranoia. Fearing an attack from either of the two Cold War superpowers, the Chairman resolved to do what his Nationalist adversary Chiang Kai-shek had already planned to do in the 1930s, which was to move all industries of military importance inland. Mao surpassed the old Kuomintang in his dedication to autarky, and when it came to preparations for war, in innovativeness. He envisaged not simply an inland relocation, but a transformation of China into a collection of self-sufficient regions, able to function independently in case of war. China effectively became a ‘cellular economy’, with provinces nurturing their own heavy industries and severely restricting trade between territories.65 Mao tolerated such erosion of central authority not solely because military considerations were at stake. It also fitted his broader ideological precepts. Autarkic regions implied that the country as a whole was independent of the world economy (we may recall Julius Nyerere’s motto from Section 6.3 that ‘if the Regions are self-reliant, then the whole Nation is self-reliant and this is our aim’). Moreover, in keeping with his egalitarianism, Mao generally disparaged specialisation and the division of labour, even within China. He therefore strove to eradicate divisions between town and countryside, championing the emergence of rural industries positioned close to farms and mines. This was partly a community-building project, an attempt to obliterate divisions of class and profession within China.66

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However, the Chairman’s choices did not prioritise growth. After the failure of the Great Leap Forward, policy alternated between orthodox planning and insurgent activism, ultimately culminating after 1966 in the chaos of the Cultural Revolution. Once again, Mao’s proclivity for grassroots ‘revolution’ undercut China’s economic bureaucracy. It also strengthened the position of the regions, which were now essentially left to fend for themselves after the disappearance of central directives. Self-sufficiency at all levels continued to be the leitmotif.67 The Maoist system of decentralised autarky forms the essential backdrop to the reform debates of the late 1970s and 1980s. The wild policy swings of the preceding decades had made central resource allocation near impossible, and undermined planning both as an idea and an institution. Thirty years of propaganda exalting self-reliance (and the preceding decades of ‘antiimperialist’ activism) had also left their mark on the Party. Even after the mid-1970s, the CCP leadership would therefore remain deeply suspicious of foreign influence. At the same time, Maoist isolation had clearly failed to deliver the economic goods. Some heavy industry had been created, but due to China’s long quarantine from foreign technological advances, equipment was outdated. Moreover, regional autonomy had broken up China into a country of disconnected ‘cellular’ economies. Overall growth had been disappointing during Mao’s reign, while other East Asian economies were advancing in strides. This ignominy was not lost on those who would replace Mao, lending their case for reform both urgency and conviction. If even Taiwan and South Korea could modernise, why not mainland China?68

7.3.2 Deng Xiaoping and a Contested Opening (1976-1990) At the time of Mao’s death in September 1976, a number of factions were jockeying for control within the CCP’s central organs.69 At the cost of some oversimplification, we can distinguish three. The leading Maoists, including the infamous ‘Gang of Four’, were quickly removed. Their programme of autarky and permanent revolution found few adherents among a Party leadership now deeply conscious of the need for reform. Mao’s designated successor Hua Guofeng (1921–2008) held high the banner of the Chairman’s teachings, but his economic policy drifted towards that of another faction, who can be named the ‘minimalists’. This faction only acknowledged the need for a minimal opening to the outside world, making allowance mainly for the import of foreign technology. This would be paid for with proceeds from coal and oil exports, transactions that would involve little exposure of the domestic manufacturing sector to the world economy. The minimalists were unwilling to tolerate foreign investment in China, which they feared would lead to a renewal of imperialist ‘exploitation’. While they were a diverse grouping, the minimalists also generally believed that a restoration of central planning

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and stable bureaucratic rule could spur growth. Their growth targets were ambitious, but their policy tools were rather conservative and had much in common with the Soviet planning approaches of the 1970s (Section 7.2). Like their Soviet counterparts, Chinese planners envisaged a tightly integrated domestic economy, and resented localism.70 The minimalist position had the ideological merit of avoiding a sharp break with the self-sufficient past, but this also proved to be its undoing once minimalist plans were implemented during Hua Guofeng’s brief tenure between 1976 and 1978. In order to avoid foreign investors on Chinese soil, most technology acquisitions under Hua involved the purchase of complete turnkey factories, leading to installations that were unsuited to Chinese conditions. However, the linchpin the minimalists had ignored was, once again, the foreign exchange balance. Currency reserves depleted quickly due to China’s expensive technology imports and it soon became clear that fuel exports alone would not balance the books. Many erstwhile supporters of the minimalist approach now sought new ways to attract technology and garner export proceeds. Among them was Deng Xiaoping. The party veteran had, in fact, been responsible for originally floating Hua’s proposal for minimal openness. Once the plan’s failure became apparent in the face of a deteriorating trade balance, he now wisely shifted to a more radical opening. Unlike Mao, Deng was willing to learn.71 Deng’s willingness to learn was aided by his lack of policy convictions. Deng had held positions of responsibility for decades (and twice suffered Mao’s purges), without ever building up a strong economic policy programme. The image presented of Deng, and very much nurtured by Deng himself, is often that of the uncommitted pragmatist. His famous quip that in policy ‘it does not matter if the cat is white or black; so long as it catches mice, it is a good cat’ seems to fit this perception. However, Deng’s flexibility in policy obscured his fixation on a single goal, which he pursued with unflinching determination. Although coated in socialist terminology, the goal turned out to be none other than the vaunted combination of ‘wealth and power’ sought by older generations of Chinese nationalists. As Deng commented in 1980: ‘The purpose of socialism is to make the country rich and strong.’72 While poverty alleviation played a role in Deng’s thinking, he preferred to emphasise the benefits of economic growth for augmenting national capabilities in the military, cultural and diplomatic spheres. It is this message that Deng used to win over a wavering Party elite at the landmark Central Committee meeting in December 1978, when he exhorted his comrades to ‘[l]et us advance courageously to change the backward condition of our country and turn it into a modern and powerful socialist state’. Starting at this meeting, Deng and his aides transformed Mao’s doctrine of isolationist nationalism into one focused squarely on development.73 To do this, the reformers redefined the nature of socialism. Like the African Socialists (though

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in effect far more successfully), Deng chose to interpret socialism as a force for growth. True socialist policy would nurture the ‘forces of production’ (a term with admirable Marxist lineage). This task was especially pressing for China, which first had to attain parity with developed nations before other socialist goals, such as equality, could be realised. ‘It is not enough just to say we are poor, and actually, we are very poor’, Deng reiterated in 1980, ‘such a status quo is far from being commensurate with the standing of a great nation such as ours. Therefore, starting last year, we shifted our focus onto economic development. . . . We cannot build socialism with just empty talk.’74 Anything obstructing the goal of development was by definition opposed to socialism. Obstructions to be removed included the inefficiencies of the planned economy and its isolationist stance. It also included many forms of internal dissent. Deng’s modernisation project relied on cohesion, stability and continued control by the Communist Party.75 The advent of Deng Xiaoping Theory, nurtured as it was by China’s persistent failure to develop economically, led the CCP to endorse a surprisingly radical opening of the Chinese economy. As Deng stressed, ‘no country can now develop by closing its door. Isolation landed China in poverty, backwardness and ignorance’.76 The main benefit from openness, in Deng’s view, stemmed from the acquisition of foreign technology, which he saw as pivotal for development. Deng’s own travels (in his youth to France and in the 1970s to the United States and Japan) shaped his view on the centrality of scientific know-how to modern nationhood. Rather than the ready-made factories purchased by the minimalists, Deng advocated the transfer of foreign standards of management and product quality, the adoption of Western practices of research, as well as the licensing of foreign patents. Without new ideas from abroad ‘we won’t be able to rid our country of poverty and backwardness or to catch-up with – still less surpass – the advanced countries’.77 The other planks of the reformist platform followed directly from Deng’s focus on technology. These planks were largely assembled by the aides of the paramount leader, in particular the far-sighted Zhao Zyiang (1919–2005). While Deng kept above the fray, Zhao gave shape to Deng’s basic aim of nationalist development. He too was prepared to make haste by ‘racing against time and quickening our speed to build our nation into a powerful, modernized state’. The central accelerator Zhao had in mind was foreign direct investment. This conveyed two main benefits. First, allowing multinational companies to invest in China would ease the transfer of their patented technology. This was preferably done through joint ventures between Chinese and foreign firms. These agreements would facilitate learning by the Chinese partner and allow it to utilise proprietary Western or Japanese technology once the joint venture expired.78 Second, foreign investors would build up Chinese capacities for producing exports. Moving beyond the sale of simple fuels as planned by the minimalists, China would now export labour-intensive

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textiles, toys and basic electronics. These earned the foreign exchange with which further technology could be acquired. Reformers bet on emulating Taiwan’s success with export processing zones (named Special Economic Zones, or SEZs, in mainland China). They were located on the coast close to the burgeoning commercial centres of Taiwan, Macao and Hong Kong. Within the SEZs, local officials softened labour laws, granted tax holidays and assisted foreign investors in dealing with China’s byzantine planning apparatus.79 Despite the boldness of these moves, reformers did not effect a wholesale opening of the Chinese economy. In classic nationalist fashion, the joint venture system and the SEZs were designed to maximise the advantages of foreign technology and export earnings, while minimising China’s foreign exposure. In most joint ventures, the inclusion of a Chinese partner (which was by definition a state-owned enterprise) afforded the Chinese government considerable control over the operations, pricing and sales policies of foreign investors. This was the case even if the foreign partner had contributed the majority of the joint venture’s capital, because the Chinese investment code stipulated a separation between ownership and control. The latter remained largely with the Chinese partner. The operation of completely foreign-owned enterprises was strongly discouraged at the start of the reform era, and those firms that did operate in this fashion were subject to various regulations. Restrictions existed on the sector in which foreign firms could engage, with services and broadly defined ‘strategic industries’ remaining off-limits. Authorities also discouraged foreign firms producing in China from selling locally, utilising a mix of price controls, export requirements and currency inconvertibility. For firms located outside of China, its markets generally remained closed by high tariff and non-tariff barriers. This does not mean that foreign investors were generally discriminated against. As exporting businesses, they also received many benefits, such as tariff rebates, that were not extended to domestic enterprises. It just implied that Chinese reformers of the 1980s preferred to employ the state to separate the domestic and international spheres of the economy. This dualism mirrored the approach taken by the East Asian developmental states of the preceding decades. This is not coincidental, because Chinese reformers looked abroad for inspiration – just as they looked to the Chinese past. The role of the Chinese state under Deng therefore had much in common with the protective state envisaged by Sun Yat-sen in The International Development of China. Reformers drew on Sun to demonstrate that foreign investment and national sovereignty could indeed exist in harmony.80 The governance of the Special Economic Zones followed the same philosophy of separating domestic and foreign spheres. In effect, it set apart a portion of territory to be tightly integrated into the world economy. These territories were carefully cordoned off from the rest of mainland China, physically and legally. Physically, the early SEZs were separated by fences and customs post

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from other regions. Legally, sales from the SEZs to the interior were strictly controlled, and especially in the first years, largely prohibited. Moreover, the SEZs were constructed in coastal areas away from Beijing or the centres of inland industry. This not only allowed the SEZs to be close to Hong Kong and Taiwan, but also meant that the foreign firms in the SEZs imposed few losses on existing Chinese industries in the interior. While the coast could specialise on labour-intensive exports, the heavy industries of the interior would continue to produce for the domestic market. The SEZs therefore allowed Chinese reformers to quarantine foreign firms, not through central regulation, but by geographic separation. This policy is remarkable because it showed Deng’s reformers were willing to compromise on two fronts. Not only were they prepared to welcome foreign investors in their quest for development, but they were willing to sacrifice another objective – domestic market unification – in a bid to control those same investors.81 Why were the early reformers so keen on setting a limit to foreign interactions? There are two reasons, which are mutually compatible. First, Deng and his lieutenants, as heirs to the CCP’s tradition of ‘anti-imperialism’ were themselves wary of ceding too much control to multinational firms. Early on, Deng cautioned that ‘while pursuing the policy of opening up to the outside world, we must stick to the principle of relying mainly on our own efforts’. He similarly warned against exposure to ‘external decadent ideologies’ and exhorted his party comrades to protect Chinese identity. When Deng named his developmental project ‘Socialism with Chinese Characteristics’, this was very much an attempt to indigenise this global ideology (parallels with ‘African Socialism’ are again clear).82 A second reason for Deng’s caution was political. His reformist faction remained under intense pressure for much of the 1980s from minimalists and Maoist remnants. Among those calling for minimal openness, party veteran Chen Yun (1905–95) proved to be the most influential. A figure of almost equal standing in the CCP to Deng himself, Chen played a leading role in several campaigns to safeguard China’s ‘socialist spiritual civilization’. This phrase became a dog whistle for all those in the Party who wished to preserve China’s (national) essence and limit external exchange. Foreign investors were called out for tainting Chinese ‘spiritual civilization’ with unwelcome values such as profit-seeking, consumerism and love of money. In 1983, 1985 and 1987, Chen’s campaigns engulfed national politics, and threatened to overwhelm reformist efforts.83 The SEZs became easy targets. Chen and his associates assaulted the SEZs for disrupting domestic integration by becoming ‘countries within the country’. Moreover, they charged that by dividing China into different zones, the reformers had encouraged inequality between regions. Foreign technology and trade would make the coast richer, while the interior would languish behind. Challenging the reformers’ track record on domestic unification was

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a productive strategy for the minimalists. As nationalists, both factions valued internal unity. Yet the reformers needed to sacrifice economic integration and equality at home to integrate with the global economy. This made them vulnerable to accusations that they were encouraging divisions within the nation. The minimalists’ propaganda therefore relished in depicting the SEZs as havens of organised crime and corruption. Most painfully, they likened the SEZs to the commercial concessions and treaty ports the Qing had ceded to foreign powers in the nineteenth century. Within the historically ‘antiimperialist’ CCP, these were heavy guns.84 Occasionally, isolationist fervour spilled out onto the streets, as it did in 1985, when students protested against ‘selling out’ the country to Japanese investors. As in South Korea under Park, integration with Japan was the hardest pill to swallow. More often, given the closed nature of Chinese politics, the controversies played out in the meeting rooms of CCP bigwigs, with leaders issuing carefully worded statements that concealed many of their disagreements. This facade also obscures whether Deng’s caution in opening up was the product of his own convictions or the result of Chen’s obstructions. In all likelihood both played a role, although Chen’s influence should probably receive greater weight. That there was a real tension between the reformers and the minimalists is most clearly shown by the fact that, where possible, reformers attempted to water down Chen’s objections by denying that openness made China in any meaningful sense less self-reliant. Zhao Ziyang pleaded with his party to ‘abandon once and for all the idea of self-sufficiency’ and instead use trade to compensate for China’s weaknesses in high-tech products. Eventually, he argued, trade would build a stronger and more resilient nation: ‘the aim of our foreign economic and technical exchange is of course to raise our capacity for self-reliance’.85 Deng, meanwhile, attempted to diffuse the debate by emphasising that the socialist state was powerful enough to manage the fallout from foreign investments. Moreover, he called upon the resources of the Chinese diaspora, whose involvement in business was less objectionable to mainland nationalists. Accordingly, much of the early investment in the People’s Republic came from ethnic Chinese businesses located in Hong Kong, Taiwan, or South-East Asia (Section 7.4).86 The reformers’ most effective strategy was simply to sidestep the ideological struggles in Beijing and take matters into their own hands. They did this most effectively by devolving power to the provinces, where Chen’s minimalist faction was weaker. Local initiative could advance Deng’s course of openness, even if reforms at the centre were blocked. The SEZs were just the vanguard of this broader decentralisation strategy. As reforms progressed, local cadres across the country were given authority to attract foreign investment and modernise local production. To make this work, the central government gave localities increasing sway over tax revenues, industrial policy and even the management of foreign trade.87 Not only could Deng blunt Chen Yun’s

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isolationism by devolving power, but he also decreased his own political culpability in case one of the provincial experiments came under fire from the minimalists. In this event, local party cadres who had gone ‘too far’ in opening up could simply be sacrificed politically without endangering Deng’s course at the national level.88 Nonetheless, decentralisation created real problems for the reformers. Once power had been devolved, provincial leaders did not necessarily act cooperatively. One notable result was the explosion of local protectionism by Chinese provinces in the 1980s. Decentralisation implied that provincial authorities now had an incentive to support ‘their’ industries at the expense of neighbouring provinces. To assure inputs for local industry, they imposed barriers preventing the export of raw materials and farm produce to other regions. Additionally, provincial authorities protected local markets by levying import duties to discourage the purchase of manufactured products from other regions. Clearly, the fragmentation of China by impromptu road blocks and toll booths (nicknamed ‘bamboo walls and brick ramparts’) was not what reformers in Beijing had intended.89 Localism mattered not only because it jeopardized national unity, but also because it could threaten Deng’s original aim, which was garnering export proceeds and technology. Development of the coastal areas was hamstrung because export industries could not always obtain raw materials or labour from the interior (internal migration remained tightly controlled under China’s residence permit system). This limited China’s export capacity, and hence its ability to earn foreign exchange. Similarly, regional separation hindered the flow of technology in the reverse direction, from the coast to the interior. Fragmentation also decreased China’s attractiveness as a destination for foreign investment. Multinationals were not only interested in China as an export hub. They eventually wanted to realise sales in its potentially vast domestic market and internal fragmentation hindered those plans. Moreover, sales by foreign firms in China’s domestic market were still restricted through government policy, further decreasing incentives to invest. The isolationist campaigns of the minimalist faction only heightened the jitters of foreign capitalists. How could one be sure the winds of change in Beijing would not suddenly reverse?90 The moment that could have turned back the tide of reform seemed to have come in 1989 with the brutal crushing of the democratic Tiananmen Square Protests. The crackdown went ahead with Deng’s approval – his project of national development did not tolerate dissent. The paramount leader was even willing to sacrifice his lieutenant Zhao Ziyang in the process, who would spend the remainder of his life under house arrest. Once again, Chen Yun’s faction was ascendant, and this time apparently decisively so. To those who had always looked sceptically upon Deng’s reforms, the democratic Tiananmen protests underscored that openness and liberalisation had gone too far. Coupled with

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the problems of domestic fragmentation, torpid foreign investment and lacklustre technology transfer, one can understand the pessimistic predictions of contemporary observers. Could China go the way of the Soviet Union, and break apart into separate territories, each choosing different speeds of reforms and openness? We should not be misled by the deception of hindsight, which colours China’s rise as inevitable. In 1990, Deng’s project seemed stuck fast halfway between a closed economy and a trading nation.91

7.3.3 Jiang Zemin and the Politics of Competition (1991–2001) Deng Xiaoping chose to meet the challenge head on and reinforce the case for openness. This was the purpose of his famous ‘Southern Tour’ in early 1992. In essence, the argument Deng made during this period was unchanged from his previous speeches. Development was of overriding importance, he reminded his listeners, and only an embrace of the opportunities offered by the world economy could bring about China’s rejuvenation. The urgency of the task had not lessened, for ‘if we don’t seize this opportunity to raise the economy to a higher level, other countries will leap ahead of us, leaving us far behind’.92 One reason for the success of Deng’s message in the early 1990s was that reformist efforts to shift the narrative over the preceding years had done their job. Their message of equating trade with wealth and power had been diffused in print, radio and educational institutions. A popular documentary series, River Elegy, broadcast on state television in 1988 to millions of excited viewers, painted the choice China faced as a starkly symbolic one. Either China would turn inward to decay (symbolised by the silted yellow of Huang He River) or it would turn outward and thrive (symbolised by the deep blue of the open ocean). Officially, the film admonished the crumbled Imperial dynasties of old, but in reality it was subtexting the minimalists in Beijing with their fixation on ‘spiritual civilization’ by reminding viewers that: In this ancient and decrepit civilization, our ancestors could only think of protecting themselves with a useless wall. Even at sea, they did not know how to trade and compete. This cultural atrophy has sapped our nation’s vitality and creativity. We must never again miss the chance given to us by destiny. . . . We must never again turn down the invitation by the sea.93

Ultimately, politics in China after Tiananmen were of course not decided by the popular sentiment of TV audiences, but by the CCP elite. Deng therefore nurtured a new generation of Party leaders who would not turn down the ‘invitation by the sea’. Among these were Jiang Zemin, who would succeed Deng as paramount leader, and Zhu Rongji (1928–), who would become China’s principal reformer in the 1990s. Both Jiang and Zhu were willing to embrace Deng’s outward turn in part because they had been brought up under his patronage. In addition, the ideological environment had changed radically, itself

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a product of Deng’s reforms. While active in junior positions in the 1980s, Jiang and in particular Zhu had been in close contact with western liberal economists. Their advice emphasised the benefits of free competition, market-friendly government institutions, and trade according to comparative advantage. The same intellectual change had taken place within the Chinese economics profession at large, where neoclassical approaches quickly replaced research in the Marxist tradition. While Chinese reformers never adopted foreign lessons in their totality, modern economics allowed reformers such as Zhu to assess the benefits of openness according to ‘scientific’ principles, lending their estimates an objectivity that Deng’s bon mots could not attain. Naturally, modern economics only determined the cat’s colour; its object of pursuit was still ‘wealth and power’. As Zhu Rongji maintained, ‘reform and opening is the only path to making the nation wealthy and the people strong’.94 In their pursuit of this goal, Jiang and Zhu followed a philosophy that differed from that of the early reformers. Deng’s approach had been predicated on a Chinese state with enough agency to select those elements of globalisation deemed necessary (technology and export proceeds) while keeping others at bay. His successors did not write off the Chinese state, but the challenges surfacing at the end of Deng’s reign made them wary of his pick-and-mix approach to globalisation. Instead, they argued for a full embrace of the world economy as it was, and pledged to work within its institutions. Chinese leaders in the 1990s, unlike Xi Jinping two decades later, considered attempts to shake up the global order futile. The scepticism of Jiang and Zhu was in line with their neoclassical outlook. The basic fact of the world economy, both leaders believed, was intense competition, a feature that was so fundamental that it could not be easily altered. However, as nationalists, they diverged from the neoclassical paradigm in seeing competition as taking place primarily between nations, rather than between firms. This was why they continued to see a role for the state: the role of the CCP was to get China fit to survive in the merciless global struggle.95 The following excerpt from a 1999 speech by Jiang Zemin on the mutually reinforcing links between competition and ‘national strength’ is worth quoting in full: Competition based on overall national strength will increasingly become the leading factor deciding a country’s future and destiny. We are facing rare development opportunities as well as grim challenges. Only by constantly improving our economic strength, national defense strength, and national cohesiveness, can we remain invincible amidst increasingly intensive international competition and truly safeguard our national sovereignty and national pride.96

The focus of the Chinese leadership on shaping national competitiveness was of course not unique among nationalists in countries that were catching up during periods of globalisation. Similar sentiments had been voiced by Max

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Weber in nineteenth-century Germany, by Fukuzawa Yukichi in Meiji Japan, as well as by Mahathir Mohamad in 1980s Malaysia (see next Section). Jiang Zemin’s view also had much in common with that of Zheng Guanying: the West had created the game of wealth and power, and China had to learn its rules.97 For Jiang, the acceptance of global competition also implied that competition needed to be encouraged domestically. Reformers in the 1990s believed that an acceleration of market reforms would lead to fiercer competition, thus raising overall levels of efficiency in the Chinese economy. Domestic competition also had a regional dimension. While Jiang recentralised some provincial tax revenues, he did not emasculate the regions. Rather, he encouraged competition between regional leaders, with the economic growth rate of a locality becoming the yardstick of success for its officials. Leaders of fast-growing provinces were promoted quickly, whereas laggards faced harsh criticism. While this system devolved some autonomy on infrastructure and industrial policy to local leaders, it assured that their goals aligned with the ultimate objective of the Party at the national level, namely a high-growth economy.98 The belief that encouraging domestic competition would make China as a whole fit for survival is also visible in Chinese industrial policy of the 1990s. Policymakers assumed that, as had been the case for Japan and South Korea, China required firms powerful enough to compete against western multinationals. Jiang styled this the ‘National Team’ – a group of Chinese firms with global reach. Zhu referred to this approach as ‘grasping the big, letting go of the small’. Whatever the name, it required an overhaul of China’s existing industrial organisation. The old dream of industrialisation – pursued by nationalists for more than a century – was no longer sufficient. The ‘National Team’ would consist of global brands, which required not merely factories, but modern marketing techniques and information technologies. This is one of the reasons why, over the course of the 1990s, attempts to attract foreign enterprises and technology were extended to the interior. The old industrial heavyweights located there, which under Deng had been well-protected from the trials of globalisation, were now fair game. Under Jiang’s dispensation, weak domestic firms needed to be ruthlessly weeded out, if necessary by foreign competition, so that the rest could survive on a global stage. However, Jiang’s domestic competition was not solely that of the unfettered market. His government also used industrial policy to help pick winners and condemn losers, so that access to subsidies, loans and benevolent regulation was partly determined by connections to the Party hierarchy.99 Nonetheless, this mixing of politics and business did not sink the project of growth. The main reason is that there remained a substantial commitment by the leadership to sharpen domestic competition. Their principal tool to accomplish this was China’s successful bid to join the World Trade Organization. Jiang committed to this goal early on, and stuck with the process until its

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completion in 2001. This determination is noteworthy given the heavy costs imposed by WTO membership on inefficient Chinese producers. Compliance with WTO rules led to a slashing of import barriers during the 1990s and a commitment to withdraw many industrial policy tools by the end of the millennium. The adjustment measures required were particularly harsh because Jiang and Zhu Rongji decided to accept the exceptionally tough terms for membership demanded by US negotiators. At the time, the deal struck was a clear victory for American diplomacy. To make matters worse for the Chinese side, the closing stage of negotiations with the US delegation were overshadowed by an outpouring of nationalist protests in China. The cause was the bombing – by none other than the United States – of the Chinese embassy in Belgrade during the NATO campaign against Yugoslavia in 1999. Despite what could have become the latest addition in the classic enumeration of Chinese ‘national humiliations’, Jiang and Zhu eventually decided to calm nationalist sentiment at home in order to proceed with signing the WTO accession treaty.100 Jiang Zemin and Zhu Rongji could not have overcome domestic opposition to WTO membership and other painful reforms had they not developed the necessary political clout. They were able to do this because, since the early 1990s, the power of the minimalists was on the wane. When the octogenarian Chen Yun and his comrades retired in the early 1990s, the minimalists lost much of their traction. This was not only due to the persuasive power of Deng’s rhetoric, but also because the minimalists had not built a power base in the provinces. Local grandees were unwilling to see a Chen Yun recentralise resources in Beijing. Jiang, on the other hand, utilised provincial initiative. At the national level, this left Jiang without serious opposition. He was able to wield power more freely than Deng had ever done and could therefore ignore isolationist interests. As in South Korea under General Park, opening up a country with a strong tradition of isolationist nationalism gathered pace only once the opposition had been muted.101 Unlike Park, who maintained formidable trade barriers during his time in office, the Jiang and Zhu administration committed itself to a much more radical opening by pursuing WTO accession. On the surface, it would seem difficult to reconcile the conditions of China’s WTO membership with a nationalist outlook. Yet it is very consistent with Jiang’s overarching theme of ‘competition’. WTO membership opened foreign markets for China’s exports, allowing it to compete globally. Less obviously, the diminution of import barriers encouraged competition at home through imports, thus fostering the fittest firms through a mechanism other than political connections. The improved selection of candidate firms for China’s ‘National Team’, in turn, would strengthen the nation’s capacity to compete abroad. Other nationalist objectives mattered as well. China was negotiating WTO membership at

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the same time as Taiwan, and pre-empting the island’s accession was a matter of prestige. The People’s Republic won that race, by twenty days.102 Success did not imply that Jiang’s openness was devoid of protectionist instincts. The continued desire to build a ‘National Team’ of showcase enterprises, which might imply a resort to industrial policy, was at odds with China’s commitment under the WTO to abstain from such tools.103 This ambivalence shows that the Nationalist Dilemma and with it the desire to see domestic markets and firms protected, was not dead, even in the age of economic expansion. Jiang Zemin’s successors during the 2000s would struggle to find ways to deal with this classic tension (Section 8.4).

7.4 Diaspora and Development in Malaysia China’s opening during the 1980s and 1990s did not just involve exports and foreign multinationals. From the very start, Deng Xiaoping’s reformers turned to the Chinese diaspora overseas, in particular in South-East Asia. These descendants of China’s late nineteenth-century emigration waves were now enticed to ‘return’ to the motherland and to bring with them their entrepreneurial skills, business contacts and capital. Moreover, reformers increasingly looked favourably on new generations of emigrants who were leaving China for destinations in Europe and the United States. The education and technical skills these sojourners would secure were to galvanize China’s development. The position of the Chinese diaspora during this period provides a unique window into the relationship between emigration and economic nationalism.104 There are, at least, two sides to this story. One comprises attitudes to emigration in the country of origin, the other perceptions of immigrants and their descendants in the destination country. One might suppose that on both sides, economic nationalists should stridently oppose migration. Nationalists in the country of origin often see emigration as a ‘loss’ of productive manpower. Moreover, as emigration usually occurs from lowwage to high-wage locations, becoming a source of migrants may be taken to indicate ‘backwardness’ and ‘underdevelopment’ – a status few nationalists cherish. Such attitudes have been historically important. Some Irish nationalists of the mid-nineteenth century depicted the packed ships leaving for the United States as a sure sign that ‘the Celtic race’ was doomed on its native isle (Section 4.4). Mao Zedong, fearing foreign dependence, heavily restricted emigration. Yet China’s experience during the reform era shows that economic nationalists do not universally reject emigration. Deng Xiaoping and his fellow reformers championed the Chinese diaspora – both recent emigrants, as well as ethnic Chinese whose ancestors had migrated generations ago – as an asset to their developmental project. Historically, some other nationalists have

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encouraged emigration as well. We may recall Leo Amery, the interwar British statesman, who explicitly encouraged emigration from Britain to Australia and Canada in order to bind these dependencies closer to the motherland through a web of personal, trade and financial relations (Section 5.2). Incidentally, where British nationalists saw the global movement of British settlers as creating a ‘Greater Britain’, some have used the similar term ‘Greater China’ to refer to the trading networks created by ethnic Chinese businesspeople in South-East Asia. Expatriates can be patriots.105 In regions receiving migrants, one might expect harsher opposition from economic nationalists. This has of course often been the case – especially if immigrants settle permanently and become a resident ethnic minority. Such immigration has been opposed by figures including Max Weber, who blamed Polish immigrants for displacing German workers in the 1890s (Section 4.2). Many twenty-first-century populists have aired similar fears (Sections 8.3, 8.5). The position of Chinese immigrants and their descendants in Malaysia was similarly contested. Malay fears of economic domination by commercially successful ethnic Chinese entrepreneurs precipitated bloody race riots in 1969. Malay ideologues such as Mahathir Mohamad subsequently argued for the construction of a distinct Malay economy. This led to concerted attempts by the Malay-dominated state in the 1970s and early 1980s to sideline the Chinese minority commercially.106 Nonetheless, it is too simplistic to see economic nationalists as always opposed to immigration and domestic ethnic minorities. The case of Malaysia’s Chinese illustrates this too: starting in the late 1980s a more expansionist Mahathir raised his sights. Instead of merely uplifting the Malays, he now argued for a comprehensive national effort to catapult Malaysia as a whole to the ranks of developed economies. This transition from Malay to Malaysian economic nationalism led Mahathir to call upon the resources of the country’s resident Chinese businesses. This too, has antecedents among expansionist nationalists: Friedrich List himself had argued for welcoming ethnically distinct but commercially successful immigrants, as had initially Alexander Hamilton. Developmental aspirations require nationalists to make many compromises, and tolerating ethnic diversity could be one of them (Sections 2.6, 3.4). However, toleration did not imply inclusion. When Mahathir exited the government in 2003, policy in Malaysia had not completely abandoned its aim of increasing the economic power of Malays over that of its ethnic Chinese citizens.107

7.4.1 China and Its Emigrants Over the past two centuries, Chinese policy towards emigration has mirrored its general stance towards the world economy. Under the Qing’s policy of reclusion, emigration was punishable by death, a provision that was formally

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retained until 1893. Such restrictions were of course difficult to enforce even in the most favourable of circumstances. Given the fading control of the Qing state, restrictions were increasingly subverted by the booming smuggling of manual labourers, especially from the southern coasts where central control was weakest. The clandestine nature of their journey encouraged Chinese migrants to organise in secret societies or voluntary associations of various kinds. These societies often managed the passage to the destination region, as well as work and social life after arrival. In British Malaya, for example, secret societies organised Chinese labour for the tin mines. Cooperation within these societies was sustained partially because Chinese emigrants stemmed from single village, clan or dialect communities. Chinese emigrants therefore acquired a reputation for ethnic cohesiveness. In a comparative perspective, however, the use of ethnic networks to organise work and business was hardly unique to Chinese workers, and similar modes of organisation were used by the minority ethnicities of the Habsburg Empire or the Soviet Union (Sections 4.3, 7.2).108 As pressure on the Qing state mounted, and reformers gained some ascendency, official attitudes to emigration softened. Not only were emigration restrictions liberalised, but emigrants were also increasingly seen as a force that could aid the modernisation of the Qing state. This option became more viable as Chinese emigrants in South-East Asia exited manual occupations and entered commercial ventures. In this process, Chinese entrepreneurs often utilised organisational forms such as cooperatives that were suited to their tightly knit networks. In British Malaya, this enabled Chinese businesses to expand into retail as well as invest in mines and plantations. However, despite the new-found potential of the diaspora to contribute capital and business contacts to the reorganisation of the mainland, a positive view of emigrants was by no means universal among modernisers. Zheng Guanying, the foremost economic nationalist of his generation, warned that emigration would deplete China’s labour reserves and that the ‘work troops’ now labouring in Malaya were better used to settle sparsely populated areas of mainland China.109 Zheng’s protégé Sun Yat-sen took a decidedly more positive view of Chinese emigrants, given his own experience as a member of various overseas Chinese communities (Section 5.5). Moreover, the diaspora had become a valuable source of capital and organisational skill for Sun’s revolutionary activities. Western ideas, including modern nationalism, spread easily among the cosmopolitan expatriates. Sun himself spent much of the decade prior to the 1911 Revolution plotting in Malaya’s Chinese towns. From then on, the diaspora remained well-connected to nationalist activities on the mainland. Chinese entrepreneurs in Malaya supported the boycott movements against British and Japanese goods, as well as the broader ‘national products’ movement. Many expatriate communities established local chapters of the Kuomintang

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Party, and mobilised in support of the Chinese war effort when Japan invaded in 1937. The diaspora played an integral role in the globalisation of Chinese nationalism.110 When China turned inward under Mao, emigration was once again curtailed. The diaspora was now shunned for its internationalist and capitalist inclinations and those with contacts to the diaspora were sometimes persecuted. The void left by the People’s Republic was partially filled by the Republic of China on Taiwan, which increasingly involved itself in the affairs of the diaspora. This also followed an economic rationale, as Taiwanese policymakers realised the potential of the diaspora in aiding the establishment of technologically advanced industries on the island (although Taipei mostly drew on return migrants from the United States rather than South-East Asia).111 Once they had secured the helm in Beijing in 1978, the Chinese reformers immediately set out to challenge Taiwan’s position and embed the diaspora within their own plans for development. In one of his first speeches on the topic, Deng Xiaoping stressed that ‘we can utilize foreign funds and technology, and overseas Chinese and foreign citizens of Chinese origin should be allowed to establish factories in China.. . . We should utilize Chinese people, both at home and abroad, as long as they are patriotic, devoted to work and capable’.112 At a later event in 1986, speaking to members of a prominent family of diaspora industrialists, he linked the diaspora with ‘the growth of national industry [which] helps to advance the progress of history’, and called their presence a ‘rehearsal for our great national reunion. We should strive for the great unity of the entire Chinese nation’. He subsequently invited members of the diaspora to ‘return’ to China, so ‘they will see what projects they can participate in and how they can contribute. I believe they will enthusiastically support our efforts to build the country’.113 Deng’s successor as paramount leader in the 1990s, Jiang Zemin, extended the offer to China’s recent emigrants who had left since the opening. Jiang’s focus was less on foreign investment, but on securing the technical and scientific elite among the emigrants: ‘[w]e should actively bring in intellectual resources from overseas and encourage those studying abroad to return and work or render their service to the motherland in one way or another’.114 The reformers believed that the diaspora held the key to China’s development. Its attractiveness to the national leadership stemmed not only from its material resources. Clearly, regular financial markets and multinationals had deeper pockets, if one was able and willing to tap them. But China in the early reform period was hardly an investor’s paradise. The economic system and its reform were labyrinthine, cultural barriers were high and the political climate uncertain. Foreign multinationals were accordingly slow to commit. Reformers hoped that ‘patriotic’ diaspora investors, motivated by a sense of ‘loyalty’ to their place of origin, would be inclined to overlook China’s shortcomings. Moreover, shared linguistic and cultural understanding eliminated

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some barriers that other investors might have stumbled over. Diaspora investors were therefore more willing to cooperate in joint ventures with local partners. This aligned with policymakers’ aim of keeping foreign capital under control. In any case, co-ethnic capital elicited less resistance from opponents of China’s opening than Western multinationals (Section 7.3).115 Yet even ethnic Chinese investors and scientists did not come primarily out of a desire to see China rejuvenated. If those dealing or studying abroad were to ‘return’ and ‘render their service to the motherland’, they needed to be enticed to do so. If they would not return, emigration might turn into brain drain, despite national loyalties. To this end, an Overseas Chinese Affairs Office (OCAO) was established in 1978 as a high-ranking administrative body to liaise with Chinese nationals abroad and offer incentives to return. These included employment, preferential access to higher education and tax breaks.116 Although the OCAO was formally only concerned with nationals of the People’s Republic, its remit was unofficially extended to ethnic Chinese more broadly, including those holding foreign citizenship. As an official explained in 1986, ethnic Chinese were ‘not only much more in number than Huaqiao [Chinese nationals overseas], but also have much more advantages in financial resources, talented persons, and relations with Taiwan. Therefore, Huaren [ethnic Chinese] should be the main object at work.’117 The OCAO was only the apex of an intricate (and sometimes chaotic) system of organisations that dealt with the diaspora and its economic, cultural or political spheres. These official or semi-official organisations liaised with a dense network of expatriate Chinese associations, which were gradually drawn into the orbit of the state.118 The OCAO and its affiliates were able to gather such influence among diaspora associations not through coercion, nor because of sheer expatriate loyalty. Diaspora businesspeople had an incentive to cooperate because officials shared information on investment opportunities in China and forged commercial networks between overseas Chinese entrepreneurs. Since the 1990s, the organs of the People’s Republic have become a broker for business deals within the diaspora. As China’s economic policy shifted from attracting inward investment to facilitating Chinese business ventures abroad, these global networks became increasingly valuable for unlocking foreign markets. As a 1995 CCP policy document proposes, forging links with outgoing migrants has ‘far-reaching significance for promoting our country’s modernising construction, implementing the unification of the motherland, expanding our country’s influence and developing our country’s relations with the countries of residence’. A return to the ‘motherland’ was then no longer a prerequisite for ‘patriotic’ duty, which could equally well be discharged by engaging in business overseas.119 At the same time, the PRC’s approach to the diaspora was rarely monolithic. This is not only a reflection of diversity within the diaspora. The

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decentralisation of power within China meant that provinces and municipalities played a crucial role in regulating diaspora emigration, return, and investment. Often it was the localities who sponsored their denizens to venture abroad, hoping that their knowledge would spur local development on return. Local officials also tracked down the descendants of ethnic Chinese who had emigrated from their locality decades ago, leveraging local ties of loyalty that counted for as much as national ones. Apart from tangible investment incentives, such as tax breaks and lenient regulations, such ‘returning’ investors were granted honourable positions in the local community and other social rewards.120 When focusing on the nationalist visions of the Chinese leadership, it is easy to lose sight of attitudes within the Chinese diaspora itself. This is not entirely accidental. During the 1980s and 1990s, members of the diaspora should not be primarily seen as propagators of nationalism. There have of course been instances when Chinese abroad were themselves originators of nationalist enterprises. It was among the diaspora that Sun Yat-sen organised his revolutionary cells. In the 1990s, some Chinese businesses abroad presented themselves as the vanguard of a Chinese economic resurgence, partly to exhort compatriots overseas to purchase their ‘national brands’ (one Chinese entrepreneur active in Europe tellingly named his company ‘Patriot Internationalization Alliance’). On the whole, however, it has been the leaders of the People’s Republic who have extolled the ‘patriotism’ of the diaspora.121 Prominent diaspora spokespeople themselves have typically attributed economic cooperation within Chinese communities in Asia to a shared ethnic and cultural background, rather than to national ideology. Lee Kuan Yew (1923–2015), the long-time prime minister of Singapore, accordingly explained intra-Chinese cooperation by stating that ‘[p]eople feel a natural empathy with those who share their physical attributes. This sense of closeness is reinforced when they also share basic culture and language. It makes for easy rapport and the trust that is the foundation of all business relations’. Some attempts were made in the 1990s by diaspora politicians (including Lee Kuan Yew) as well as PRC officials to build an ideology promoting a distinct ‘Chinese economy’ in South-East Asia. According to its proponents, such an economy was undergirded by a unique set of ‘Confucian’ or ‘Asian values’, including collectivism, discipline and competition. These narratives indicate an increasing desire among officials and diaspora representatives to create a distinct economic identity to differentiate oneself from Western-led globalisation projects. However, such ethnic or cultural diaspora identities have not necessarily evolved into a ‘national’ identity.122 The same is true for Malaysia’s ethnic Chinese minority, to whom we will turn now.

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7.4.2 The Chinese Diaspora in Malaysia: Conflict (1969–1985) British colonisation and large-scale Chinese immigration in the second half of the nineteenth century transformed the Muslim sultanates on the Malay peninsula into multiethnic polities. Immigration of ethnic Chinese (and Indian) workers was tolerated, and to some degree encouraged, by the British rulers who saw migrant labour as pliable and productive. Over time, an ethnic division of labour emerged on the peninsula. Malays were predominantly involved in subsistence farming, as well as in the bureaucracy. Having gradually exited the most backbreaking work in the mines for commercial pursuits, many Chinese were increasingly active in small-scale manufacturing and retail trades. Multinationals, mainly British corporations who enjoyed the support of the colonial government, dominated the mainstay of the Malaysian economy: rubber and palm oil plantations, tin mines, as well as the import-export trade. Much of the manual work on the plantations was carried out by Indian labourers.123 The British colonial government, in the expectation that migrants would not settle permanently, made little effort to integrate Malay, Indian and Chinese communities. Despite this segregation, inter-ethnic trade was important. In particular, large British trading houses and banks worked closely with smallscale Chinese entrepreneurs, who dominated downstream retail. The economic complementarity – and perceived cooperation – between British and Chinese traders bestowed upon the latter the reputation of collaborating with foreign firms. Cognisant of the differences, some parallels can be drawn with the economic situation of Armenian merchants in the late Ottoman Empire (Section 4.5). In both cases, an ethnic minority was resented not only for being commercially successful, but also for supposedly serving as an entry point for foreign capital.124 Yet Malay resentment, while real enough, did not initially manifest itself in economic nationalism or in large-scale intercommunal violence (although Maoist guerrillas waged an insurgency in the Malaysian jungles in the 1950s that sometimes took on an ethnic dimension). The Malay nationalist movement, which grew rapidly in the late 1940s, was mostly interested in securing political independence. This reflected the priorities of the Malay bureaucratic elite. Moreover, British conditions for granting independence stipulated power-sharing between the major ethnic groups. Given that Malays only constituted half of the population of the new state, independence in 1957 could not be had without interethnic accommodation. The result was a tripartite alliance between the major Malay nationalist party UMNO (United Malays National Organisation) and smaller Chinese and Indian parties, thus preserving the status quo after independence.125 The status quo was rudely shattered by violent race riots in 1969, which left hundreds dead and much (especially Chinese) property destroyed. The political fallout gave voice to a Malay nationalist fringe, whose spokespeople

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blamed the riots on Malay disaffection with the economic inequality between the country’s ethnic groups. One of these voices would help determine Malaysia’s course for decades: Mahathir Mohamad, a backbencher within the ruling UMNO party. The book that helped to catapult him into the limelight was The Malay Dilemma (1970), a fulminating call for Malay economic resurgence. The book was quickly banned in Malaysia on grounds of its stereotyping of ethnic Chinese and it remained banned until its author became prime minister in 1981. Nonetheless, illegal copies of the work from nearby Singapore circulated widely, and it quickly left its mark on Malaysian politics.126 Mahathir’s work is a prime example of nationalist thinking on the relationship between ethnicity and economic development. His thinking echoes that of Max Weber’s equally zealous Inaugural Lecture of 1895, where Weber reflected on ethnic conflict between Poles and Germans (Section 4.2). Like Weber’s Inaugural Lecture, the world of Mahathir’s Malay Dilemma is one of fierce racial competition, and Mahathir similarly turned to social Darwinism to structure this world. According to Mahathir, the ability of a racial group to compete for resources was determined by genetic and environmental factors. In principle, Mahathir believed, this led to a ‘survival of the fittest’.127 Due to the natural bounty of their tropical lands, Malays had grown indolent and weak, traits that amplified over generations. They remained in subsistence agriculture. Chinese immigrants, Mahathir conjectured, were used to the harsher and more unforgiving environment of their homeland, which increased their ability to compete commercially once they migrated to Malaya:128 The Chinese who flooded Malaya with the subsequent encouragement of the British were therefore adventurous and resourceful. The Malays, whose own hereditary and environmental influence had been so debilitating, could do nothing but retreat before the onslaught of Chinese immigrants. Whatever the Malays could do, the Chinese could do better and more cheaply. Before long the industrious and determined immigrants had displaced the Malays in petty trading and all branches of skilled work.129

The result was, as Mahathir stressed indignantly, a Malay relegation to agriculture, or even worse, to the bureaucratic professions, which ‘created for the Malays a soft environment which removed all challenge to their survival and progress’.130 Mahathir now faced the same dilemma of social Darwinism as Weber: was the decline of one’s own ethnic group therefore not just the outcome of natural selection? Mahathir answered that Malays were outcompeted not only because they were ‘weak’, but also because they possessed various positive moral traits (politeness, moderation, etc.) that inhibited their drive to struggle ruthlessly.131 We may remember that Weber had similarly

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blamed the inability of Germans to compete with lower Polish wages on the supposedly higher level of German ‘culture’. Moreover, Mahathir argued that rapacious Chinese business practices were bending the rules of the game. With a parade of ethnic clichés that would have made Werner Sombart blush, Mahathir fumed against ‘monopolizing’ Chinese guilds and associations bent on controlling ‘every form of business from hawking fruits to multi-million construction work’.132 Chinese clannishness made such malfeasance impossible to detect, Mahathir supposed, and Chinese ethnic cohesion made cooperation with outsiders unfeasible, because ‘the Chinese will not suffer the presence of anyone not of his own race in his business unless it is absolutely unavoidable’.133 This unfair competition invalidated the laws of natural selection, because ‘[t]he competition which should be between individuals and business groups has developed into a competition between racial groups in which one group has an absolute advantage over the other. This can hardly be termed fair competition’.134 Mahathir then deduced that the Malays, faced with such biased odds, were entitled to ‘constructive protection’ by the Malaysian state. A system of quotas would induct Malays into the business world, where they would learn to compete on an equal footing. He likened this policy to the use of tariffs to raise up infant industries against international competition.135 In many ways, the argument was indeed similar, only that the nation which was now to be raised from agriculture to ‘modern’ and ‘urban’ occupations was an ethnic group (Malays) rather than a nation-state (Malaysia).136 Like any good proponent of infant industries, Mahathir also stressed that protection was a temporary solution. Its aim was only to prepare Malays for competition with Chinese entrepreneurs. Moreover, policy should not support all Malays equally, but preferably the strong, those who were most likely to survive the coming contest.137 The resulting inequality within the Malay community was no cause for concern for Mahathir. It was better to have rich Malays than rich Chinese, because for Malay tycoons ‘[t]he money which they have acquired has become an asset to the Malays as a whole because by and large, these Malays do have a sense of obligation to their country and their people’.138 Rich Malays were patriotic. The Malay Dilemma hit the right note among Malay nationalists. In the year after its publication, an UMNO-led emergency government introduced the New Economic Policy (NEP). The NEP instituted a broad programme of interventions to advance the economic position of Malays (as well as that of some smaller indigenous ethnic groups). A second set of interventions was designed to eradicate poverty irrespective of race, although in practice most of the poor receiving assistance were also Malay. Mahathir’s staunch advocacy of NEP-like policies in the Malay Dilemma aided his quick rise through UMNO’s ranks during the 1970s and structured the policy’s execution, especially after he became prime minister in 1981.139

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One of the NEP’s core provisions were ethnic quotas to promote Malay employment in managerial and urban occupations. Public enterprises, which were expanded greatly by the government, were also used to provide Malays with employment, credit and business premises. The capstone of these efforts was the Industrial Coordination Act (1975), which gave the government broad powers to suspend the operating license of manufacturing enterprises not serving ‘the national interest’. The authorities used this provision to ramp up pressure on firms who were not utilising Malay distributors, labour and capital.140 In addition, Malay businesses were given preferential treatment in regulatory decisions and public procurement tenders. This created a tight nexus between politicians and Malay entrepreneurs, some of whom amassed great wealth from access to government patronage. The UMNO party itself became a major corporate player, managing a vast investment portfolio of enterprises.141 Although this deepened inequality within the Malay community, such favouritism was in line with Mahathir’s thinking. After all, the Malay Dilemma advocated that the government nurture a class of rich Malays.142 However, the NEP was not solely a smokescreen for nepotism. One of its major objectives was that 30 per cent of all corporate equity by the year 1990 should be in the hands of Malays and other indigenous ethnicities. The government did therefore attempt to ensure a wider distribution of asset ownership. This was partially accomplished by founding well-resourced holding companies, which invested in corporate equity on behalf of the Malay community. As non-Malay firms were mandated to restructure their ownership under the Industrial Coordination Act, there were plenty of opportunities to buy stock. The holding companies therefore rapidly came to dominate the Malaysian corporate scene. In 1981, the holding companies’ shares were partially divested to individual Malays in accordance with the NEP. However, building a community of Malay shareholders was not easy. When Malays were offered shares at a preferential rate, economic nationalism proved no match for the temptation to make a quick profit. Many Malays resold their shares at the higher market rate – to Chinese investors. The solution devised by the government was to divest corporate equity to a unit trust fund whose shares, while held by individual Malay shareholders, could only be sold back to the fund itself. Equity thus remained in Malay hands.143 This mechanism, reminiscent of Arthur Ruppin’s arrangement to protect Jewish property in interwar Palestine, prevented the ‘leakage’ of assets to other ethnic groups (Section 5.4). In the Palestinian case, Zionist economic nationalism had sharpened a nationalist Arab reaction. This did not happen in Malaysia, because Chinese communal leaders pursued a strategy of accommodation. There are several reasons for this. Chinese political parties remained part of the governing coalition with UMNO, thus granting them some access to power that political elites were unwilling to forfeit. Furthermore, many Chinese tycoons

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had themselves amassed sprawling commercial empires that they were hesitant to risk in an escalating sectarian conflict. Instead, their financial resources gave them the opportunity to build rapport with Malay and Chinese politicians in order to gain access to the public feeding troughs themselves. Many successful Chinese entrepreneurs also installed Malay co-directors to maintain the legal façade required by the NEP, while continuing to manage their business affairs as before. Others took advantages of the opening of mainland China to invest overseas. It was exactly during the peak of the NEP in the late 1970s and early 1980s that diaspora capital started to flow to projects in the People’s Republic (often through Hong Kong).144 Clearly, diaspora investments in China were not only driven by the profits and ‘patriotism’ to be had there, but also by the difficult position these investors faced at home due to surging Malay economic nationalism. Those who bore most of the brunt of the NEP were the small Chinese shopkeepers and family businesses, who had neither the resources to patronise politicians in Malaysia nor the capital required for substantial ventures in China. They became increasingly disaffected with the strategy of accommodation pursued by their communal leaders and pushed for economic selforganisation within the Chinese community. Instead of small family enterprises competing against Malay state-backed conglomerates, they wanted Chinese investors to pool resources and invest in common ventures. This idea materialised in the form of a Chinese investment fund (MPH), which collected the savings of about 200,000 Chinese Malaysians in 1975. Although the fund snowballed rapidly, its possibilities for expansion were limited over the medium term. MPH’s directors, who were linked to the major Chinese political parties, were unwilling to purchase Malay property, so as not to antagonize their UMNO coalition partner. Purchasing stock in profitable Chinese companies, on the other hand, was resisted by Chinese tycoons who feared a loss of ownership – belying Mahathir’s cliché about Chinese ethnic cohesion in business. This forced the fund to invest in increasingly speculative ventures, ultimately leading to its collapse in 1986. Many Chinese deposit-taking cooperatives that were founded with similar aims of co-ethnic investment also floundered. This dashed the high hopes for Chinese self-organisation in Malaysia.145 The bargaining power of the Chinese community was additionally limited by the government’s ability to tap foreign capital. As in most post-colonial societies, Malaysia’s leaders did sometimes seek to limit asset ownership by foreign concerns, especially if these were linked to the former British coloniser. Mahathir’s government therefore directed Malay investment trusts to purchase ownership stakes in major British mining and plantation firms. This reduced British ownership and increased ethnic Malay equity holdings in one fell swoop.146 Yet the government needed to be very careful not to antagonise foreign capital. Given that it did not wish to utilise domestic capital, which was largely Chinese, any developmental aims were to an even greater extent reliant

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on external investment. For the same reason, the government was hesitant to rely on import substitution industrialisation through tariff barriers. Such a move would have privileged existing firms, which were once again largely Chinese. Instead, the government invited foreign multinationals to the country to produce labour-intensive goods for export. As well as bringing technology and foreign exchange, multinationals provided crucial employment and training opportunities for Malays. Most importantly, their presence avoided a resort to domestic Chinese capital. Malay economic nationalism, by discriminating against much of the capital available in Malaysia, paradoxically increased the international exposure of the Malaysian economy as a whole.147

7.4.3 The Chinese Diaspora in Malaysia: Development (1986–2003) Mahathir’s outlook on the Malaysian economy darkened in the mid-1980s. This was a period of economic stress, when falling prices for the country’s major commodity exports such as palm oil and rubber depressed incomes. A bloated state apparatus overburdened with nurturing Malay businesses also seemed to drag down growth. Mahathir concluded that falling commodity prices necessitated an industrialisation strategy for the country as a whole, while administrative overstretch called for a rolling back of state protection for Malays. In 1986 Mahathir accordingly announced that he would ‘hold the NEP in abeyance’ and relaxed Malay equity requirements for private companies. By 1991, the prime minister had also initiated his Vision 2020 to make Malaysia a ‘fully developed’, ‘industrialized’ and ‘unified’ nation. National development, rather than ethnic redistribution, was now the order of the day.148 This policy shift was nonetheless grounded in persistent themes of Mahathir’s economic thinking, in particular the concept of competition already so prominent in the Malay Dilemma. The main change was that competition was now imagined to take place not between ethnicities within a country, but between nation-states in the world economy. This Weberian transposition of ethnic competition to the global level explains much of Mahathir’s policy after the mid-1980s. For him, both levels were intimately related. As he explained, ‘the problem of the inequitable development of nations is reflected in the unequal development of the different races in Malaysia’.149 Inequality and fierce competition held sway globally, just as they had held sway on the Malaysian peninsula. This implied that it was no longer enough to prepare ethnic Malays for competition against local Chinese shopkeepers. Rather, they needed to be equipped to compete against American, British and German multinationals, because ‘entry into the world market pits our companies against all comers and subjects them to the full force of international competition’.150 In this world, there was no room for inefficient state enterprises and Malay businesspeople relying on state tutelage. ‘Are we prepared to be colonized and humiliated again?’ Mahathir asked

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rhetorically, ‘do we want to remain a dependent people who rely on other people for our own easy life?’151 The need for Malays to stand on their own feet and face international competition was also the rationale behind Mahathir’s keynote programme of privatisation, which rapidly gathered steam in the late 1980s. Privatising inefficiently run state assets to Malay entrepreneurs, Mahathir hoped, would create a ‘Malaysia Incorporated’ of dynamic enterprises ‘releasing the full potential of the wealth of the nation’.152 This did not imply a full recantation of the NEP. Mahathir stressed that it was due to previous efforts at ethnic redistribution that a Malay business class had emerged who could now benefit from privatisation. Malays were ‘more able to take on the world’.153 Privatisation was a continuation of the NEP, but without the direct state supervision. In other ways, Mahathir’s new focus on international rather than domestic inequality precipitated a concern for the competitiveness of the entire country, and not just the advancement of Malays. Mahathir’s previous efforts had zoomed in on the ‘modernisation’ and ‘urbanisation’ of the Malays; now Malaysia as a nation was to be transformed from a producer of agricultural commodities and low-grade manufactures to a modern industrial power. Mahathir thus ceased his tirades against ‘Chinese economic hegemony’ and blasted ‘Western economic dominance’ instead. Western countries were ‘free traders of convenience’, Mahathir charged, who preached globalisation only to resort to protectionism when it suited them. Global financial institutions burdened the developing world with debt, only to strangle them by increasing interest rates. A ‘monopoly’ of Western countries was furthermore manipulating currency and commodity markets to the detriment of the developing world’s primary sector exporters, whose purchasing power was rapidly being eroded. Malaysia was subject to the ‘economic and technological oppression of an insensitive North’, Mahathir accused, but ‘we most certainly do not want to continue to be the plantation and mines for Europe or the rest of the world’.154 The implication of this rhetoric was the same as in the Malay Dilemma. Competition was a welcome stimulant, but unfortunately, the other side had tilted the playing field, so that fair competition was unattainable. This legitimised defensive measures, in this case state support for modern heavy industries. Apart from steel, always a nationalist staple, Mahathir’s prestige project was the manufacture of a ‘national car’. The scheme diverted enormous resources and required increasing tariffs in the late 1980s, but was nonetheless pursued as an incubator for high-tech industry. As Mahathir admitted, ‘there is a cost that we have to bear’ for the nation’s long-term industrial prospects.155 In other words, Mahathir became a classic expansionist nationalist. This once again shows the salience of this creed even during the 1980s.

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In 1981, Mahathir had even polished his anti-imperialist credentials by instituting a ‘Buy British Last’ policy – a remarkable comeback of the traditional nationalist boycott. This turn away from the West went hand-in-hand with a turn towards alternative models of business and development. Mahathir came out strongly in favour of ‘Asian values’ in business (despite his dislike of their proponent, Singapore’s Lee Kuan Yew). He additionally propagated a ‘Look East’ policy in development (despite his earlier fulminations against Chinese economic domination). Primarily, however, ‘Look East’ was based on Mahathir’s almost obsessive admiration of Japan, and to a lesser degree South Korea. These countries were credited by the Prime Minister as inspiration for his policies of sponsored industrialisation, close state-business relations and engagement with international competition.156 As has been the case with many nationalists, Mahathir’s criticism of globalisation correlated with the severity of the economic crises Malaysia was facing – increasing during 1985 and 86 and exploding during the most severe meltdown: the Asian financial crisis of 1997. When weak economic fundamentals in Thailand, and subsequently in Indonesia and South Korea, led to a sudden capital flight from those countries, investors similarly withdrew their money from Malaysia. This sent its currency, the ringgit, into a tailspin. Mahathir protested that the country was being unfairly punished by international speculators, as its economic data was robust compared to that of its neighbours. The prime minister, who once again sensed the playing field unfairly tilted against his team, reacted with strong attacks against ‘unnecessary, unproductive and immoral’ currency traders who were asserting ‘colonial’ control by global financial markets. This was nothing but an ‘international dictatorship of manipulators’ carrying out a ‘Jewish agenda’. Unsurprisingly, branding currency traders as ‘foreign beasts’ did little to calm markets. Mahathir’s fracturing government spent much of the summer of 1997 desperately trying to stem capital flight while staving off demands by the IMF to liberalise its financial markets and follow international standards of corporate governance. Eventually the government imposed capital controls to ‘regain monetary independence’, a move condemned as heretical at the time by the IMF and much of the financial press.157 Nonetheless, Mahathir’s decision to opt out of Western-led financial integration, while spectacular, remained an isolated event in the 1990s. Mahathir’s bark far exceeded his capacity to bite; as a small industrialising country Malaysia could not afford to isolate itself for long. Mahathir sought salvation in regional integration with Japan, yet his hope of a coordinated ‘Asian response’ to the crisis faltered. The Japanese regional leadership Mahathir had hoped for never came. This should not have come as a surprise: by the end of the millennium, the Japanese economy had been bogged down by years of deflation, and was no longer the paragon of strength that could have led a ‘nationalist’ response. Mahathir increasingly turned to China as a rising power, but its time

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had not yet come and there was little sign yet of an emerging ‘Beijing Consensus’. Malaysia substantially eased its capital controls after half a year.158 At the same time, Mahathir’s turn to developmental nationalism opened up opportunities for interethnic cooperation domestically. First, increased confrontation with the outside world demanded greater internal unity. In his writings, Mahathir now stressed the Bangsa Malaysia (Malaysian nation) that consisted of all races, rather than the narrower Malay nationalism he was customarily associated with. While he continued to defend the rationale behind the NEP, his newer publications ditched the social Darwinism and ethnic stereotyping of ethnic Chinese that had given the Malay Dilemma its sectarian quality.159 Second, the focus on growth under Vision 2020 required a full mobilisation of domestic resources. This brought all domestic capitalists, including Chinese, back into the fold. Policy shifted to fostering cooperation between Malay and Chinese entrepreneurs. Often, access to government patronage became decisive, not ethnicity.160 Third, improved relations with the People’s Republic of China in the 1990s provided Malaysia’s domestic Chinese with a valuable position as mediators and limited the discrimination to which they were exposed.161 Fourth, during periods of financial stress, domestic Chinese financiers became even more valuable as foreign capital dried up. During the 1997 Asian financial crisis, the government allowed domestic Chinese capitalists to bail out troubled Malay concerns, rather than seeing their stock fall into foreign hands. Whereas previously, foreign investors had outranked Chinese entrepreneurs, the government had now reversed its order of preferences.162 Notwithstanding the improved position of the Chinese minority, there were limits on Mahathir’s Malaysian nationalism. The resort to Chinese capital in 1997 was only a temporary solution to an acute crisis and the government remained committed to seeing Malay equity holding rise over the medium term. Mahathir’s policy of privatisation continued to aid mainly Malay investors, as such deals required political connections that could be harder to establish for Chinese entrepreneurs. Five decades of ethnic politics and three decades of ethnic quotas meant that ethnicity was too entrenched a category to be easily overridden by a newly fashioned Malaysian unity. This was also Mahathir’s legacy. After his exit from office in 2003, Mahathir would continue to wrestle with the double-faced legacy of Malay and Malaysian nationalism for the next decades, including in his second stint as prime minister between 2018 and 2020.163

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8 Populist Discontents, 2002–2021

8.1 Introduction A powerful new backlash against globalisation shaped the first two decades of the millennium. Populist nationalism played a powerful role in this backlash. In understanding its origins, it is useful to draw on the experiences of Argentina and Egypt, the archetypical cases of populism in the postwar era (Section 6.2). Over many decades, the integration of the Argentinian and Egyptian economies into global exchange had led to rising domestic inequalities. This evened the road for Juan Perón and Gamal Abdel Nasser to launch a populist programme, that is to attack local elites who had ‘sold out’ the nation by profiting from international integration. Both leaders subsequently implemented a programme of economic isolation.1 We can observe the same basic dynamic in the contemporary era. The most remarkable manifestation of this sentiment may have been the election and presidency of Donald J. Trump (1946–), who steered the United States unto an isolationist course. Trump railed against ‘transnational’ elites who had surrendered the welfare of American workers through free trade agreements and concessions to China. He explicitly placed himself in the tradition of nineteenth-century American protectionism, but his ideas drew most heavily on the ‘Japan Bashing’ of the 1980s and critiques of the North American Free Trade Agreement (NAFTA) stemming from the 1990s. Trump, as well as his right-wing populist colleagues in Europe, were thus a late reaction to the preceding age of global integration.2 This reaction against globalisation started more than a decade earlier in the poorest countries of the Global South, where it came from the left. This is no accident. In countries with stronger states, globalisation had often been seen by nationalists as a chance to expand exports and national income. Leaders in the Baltic states, China and Malaysia of the 1980s and 1990s, for all their grumblings, could use the state as a tool to shape national competitiveness. In poorer countries, on the other hand, the state had less independent agency to structure the forces of globalisation. In Latin America and Africa, international integration was therefore perceived to have run unchecked, eroding local control over 268

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policy and resources. Three further factors spurred popular mobilisation against economic integration in Africa and Latin America. First, activists from the Global South felt that the sacrifice of economic sovereignty had not brought improvements in living standards for the majority of citizens in these countries. Opposition politicians could therefore easily argue that popular welfare was better served by taking back local control. Second, the position that globalisation had not benefited the poor was also increasingly voiced by professional economists, non-governmental organisations (NGOs) and activists from developed countries. The critical writings of Washington insiders such as Joseph Stiglitz (2002) and the protests against the World Trade Organization in Seattle (1999) lent transnational support to the grievances voiced by campaigners from developing countries. Third, the late 1980s and early 1990s had seen a wave of democratic reforms across the Global South, which opened up new avenues for political participation. This surge in mobilisation helped to swing policy away from an economic integration that was perceived to benefit only a small class of transnational elites.3 At the start of the new millennium, we therefore see the appearance of popular anti-globalisation movements, often concurrent with a critique of ‘neoliberalism’. Both can be understood as oppositions to a diverse set of problems associated with the policies of the preceding decades. These problems included influence over domestic policy by multilateral institutions such as the IMF and the World Bank, erosion of workers’ rights, fiscal austerity, trade liberalisation, the presence of multinational companies and environmental degradation. Not all these issues were always and everywhere viewed through a nationalist lens.4 Yet nationalism did often provide a powerful framework through which oppositions could bundle their demands on macroeconomic, social, ethnic and environmental issues. The case of Bolivia illustrates this well. Nationalism became a viable lens through which to view social and environmental problems because these were thought to stem from a lack of Bolivian control over natural resources such as water, gas, land and minerals. The resource nationalism of Evo Morales (1959–) and Álvaro García Linera (1962–) demonstrates the mobilising potential of the idea that natural resources should be protected as part of a ‘national patrimony’.5 The anti-globalisation movements of the early 2000s were further boosted by the 2008 global financial crisis and the subsequent eurozone debt crisis. While these crises did not lead directly to protectionism, as had occurred after the economic downturns of the 1930s, they did demonstrate how rapidly negative shocks could be transmitted through integrated financial markets. Bank bailouts that benefited the rich and fiscal austerity that hurt the poor also illustrated that the gains and pains from financial integration were unequally distributed. Much resistance to globalisation therefore continued to come from the ‘left’, especially in the southern eurozone countries subject to fiscal

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austerity. However, this changed as populists on the European right increasingly mobilised resistance to the transnational institutions of the eurozone and to the EU more generally.6 In particular, the crisis accentuated calls for monetary sovereignty in Hungary, Germany and Britain. These forces have proved a formidable challenge to the European Union. Three other developments aided the rise of nationalist critiques of globalisation from the right.7 First, populist politicians in both Europe and the United States connected economic pressures to cultural fears. This proved to be particularly effective when campaigning on an anti-immigration platform, given that migrants could both be blamed for the job losses of native workers, as well as for undermining national cultural identity. These strategies played an important role in the exit of the United Kingdom from the European Union and in the rise of Donald Trump. Second, the coronavirus pandemic that commenced in 2020 accentuated the fragility of transnational supply chains. Governments reacted to the pandemic with export bans on vital medical equipment. Moreover, lockdowns in Asia – in particular in China – starved industries around the globe of crucial raw materials and intermediate inputs. Governments therefore strove to renationalise supply chains, bringing about the rebirth of industrial policy in India, Europe and the United States. President Trump also utilised the pandemic to push through increasingly radical restrictions on immigration.8 The final impetus for the surge in economic nationalism in the late 2010s was the continuing rise of China. Chinese imports displaced workers in competing industries in Europe and especially the United States, accentuating demands for protection. Western protectionists pinned Chinese success on the advantage bestowed unto Chinese companies by the industrial policies of the government. These concerns were particularly pressing in high-tech sectors, where Chinese authorities intervened heavily. Leaders such as Xi Jinping (1953–) viewed the indigenisation of technology as crucial for the country to move out of labour-intensive manufacturing and continue its economic expansion. Policymakers in advanced countries, however, viewed Chinese techno-nationalism as a mortal threat to the competitiveness of ‘their’ firms. The powerful cocktail of domestic inequality, financial crises, surging migration, the pandemic and Chinese expansion has given renewed impetus to dreams of isolation.

8.2 ‘Gas for Bolivians’: Resource Nationalism and the Environment Bolivia had been at the forefront of the great liberalisation of the 1980s and 1990s. In the 2000s, it became the vanguard of the backlash against globalisation. Both facts are clearly related to each other. The Bolivian reaction was so virulent because the previous decades had internationalised control over local

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‘gas for bolivians’: resource nationalism and the environment 271 resources and policies. As this process of market integration was seen as disproportionately benefiting a small (and ethnically differentiated) elite, the backlash took the form of a populist mobilisation. The demands of Bolivian protesters coalesced around tangible assets, the nationalisation of which was seen as key to claiming back economic sovereignty. These were primarily natural resources, specifically water, forests, hydrocarbons and minerals. The Bolivian case therefore provides a window through which we can examine the way economic nationalists view natural resources and the environment.9 Many protesters who took to the streets in Bolivia in the early 2000s occupied an isolationist position. They argued that natural resources and the environment could not be separated, with both forming an integral part of Bolivia’s ‘national patrimony’. Often drawing on indigenous Andean concepts stressing the symbiosis between human welfare and the natural world, these movements opposed resource extraction and exports. Stewardship over natural resources was to revert back to local communities, rather than to global markets or multinational corporations. We can find precedents of this position in the arguments of Alberto Torres, the nationalist intellectual who had opposed deforestation in Brazil one century earlier (Section 5.6), or even in the arguments of Baltic and Ukrainian nationalists in the 1980s who fought against Soviet overexploitation of ‘their’ minerals (Section 7.2). For isolationists, the preservation of ‘national’ resources takes precedence over extraction and economic growth. Other Bolivian protesters took a position that was only moderately isolationist and not averse to extraction and growth. In this intermediate view, natural resources were still part of a ‘national patrimony’ that needed to be defended from foreign acquisition. Instead of exporting, resources should be extracted and used domestically to fuel national industrialisation. This was to be carried out by a powerful state, which would nationalise resource deposits and protect domestic industry. In this view, environmental protection was of secondary concern, although the relatively small scale of extraction envisaged by this strand may have offered some safeguards to overexploitation. The unprecedented popular mobilisation catapulted the socialists Evo Morales Ayma and Álvaro García Linera into office as president and vicepresident of Bolivia respectively. Their initial policy involved a compromise between both strands, with Morales championing the ‘indigenous’ safeguarding of resources and García Linera following domestic industrialisation.10 Yet this initial equilibrium proved unstable for a number of reasons. First, there was an obvious tension between extraction and environmental protection. This came to a head in the conflict over mining and infrastructure projects in protected Amazonian lands. Second, the extent of job creation in purely domestic resource industries was small. Exporting resources, on the other hand, could generate revenue for redistribution to the government’s poor constituents. Finally, as a poor and small country, the need for foreign

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investment in Bolivian industry remained high. Both Morales and García Linera therefore shifted to a third position: resources were extracted and exported with the help of foreign investors. The export proceeds were then redistributed domestically, as well as invested in domestic industries. National goals such as industrialisation were now seen as directly dependent on the pace of resource extraction, which therefore took place with little regard for environmental consequences.11 *

The extraction of Andean resources for overseas export is as old as the region’s settlement by Europeans. The legendary silver mines of Potosí supplied the Spanish Empire with an unrivalled wealth in precious metals. Extraction by the Crown pressed indigenous communities into relentless servitude, establishing a firm association between resource exports and predatory colonialism that future generations of Bolivian nationalists, including Evo Morales, would rally against. Silver exports continued to dominate after a small group of ‘white’ elites carved out Bolivia as an independent republic from the territory of the decaying Spanish Empire in 1825.12 The country’s new rulers fought two wars over resources, one between 1879 and 1880 against Chile over coastal nitrate deposits, and one between 1932 and 1935 against Paraguay, ostensibly over oil in the Chaco region. Both wars were lost at the cost of many indigenous lives. At the start of the twentieth century, silver exports were slowly replaced by tin in the Andean highlands of the west, while rubber cultivation became the staple in the tropical lowlands of the east. Both sectors were geared towards exports. The rule of the ‘tin barons’ and rubber planters brought wealth to the resource elites, but did little to ameliorate the lot of Bolivia’s indigenous populations, primarily the Andean Aymara and Quechua, who performed much of the crushing labour.13 In the postwar era, left-wing reformers of the Revolutionary Nationalist Movement (MNR by its Spanish acronym) attempted to rectify the worst excesses of this system by protecting domestic industries, nationalising mines and integrating indigenous peoples into a unified Spanish-speaking nation. Although this eliminated the egregious abuses of the colonial and oligarchic periods, representatives from indigenous communities were rarely consulted. Indeed, the homogenising impulse of the MNR left little space for separate Aymara or Quechua identities. Moreover, as the MNR grew accustomed to power, the party gradually turned into a well-oiled machine for dispensing political patronage and business favours, thus forming a new elite.14 Eventually, Aymara intellectuals founded their own nationalist movements. The most radical of these strove to re-found Bolivia as a nation with a predominantly Andean, rather than European, identity. This form of indigenous nationalism proved influential in shaping the ideas of both Evo

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‘gas for bolivians’: resource nationalism and the environment 273 Morales and García Linera. Morales championed his own Aymara roots and created organisations on that basis. García Linera, although not claiming such heritage himself, was leader of an indigenous nationalist guerrilla army in the 1990s.15 These indigenous groups opposed the governments of successive military dictators, as well as those of the MNR. One additional reason for opposition to the MNR was the party’s swift programmatic turn from import-substitution to liberal openness in the 1980s. MNR politicians cooperated closely with the IMF in transforming the state-run Bolivian economy through a series of structural adjustment and market liberalisation programmes. Gonzalo Sánchez de Lozada, a MNR mining magnate who captured the presidency twice (1993– 97 and 2002–03) instituted a particularly sweeping programme of privatisation. This dismembered both the state’s mining and its hydrocarbon company, offering its best-performing assets for sale to well-capitalised domestic and foreign investors. Sánchez de Lozada’s own private mining corporation was able to participate actively in this process. Concurrently, miners faced surging unemployment and hardship as state mines were restructured or closed down.16 However, the administrations of Sánchez de Lozada (or Goni, as he is known in Bolivia) were by no means only attempts to enrich the elite connected to the MNR. Goni was as liberal politically as he was economically, so he did encourage electoral participation by Bolivia’s poor and indigenous majority. In particular, he turned political decision-making over to the local level and encouraged the growth of a vibrant civil society. This eventually backfired on the Goni administration. The combination of economic destitution and political liberalisation brought forth an explosion of anti-globalisation movements that rocked the country between 2000 and 2005.17 One of the earliest sites of resistance were the eastern lowlands, the region of origin for much of Bolivia’s commodity exports. By the turn of the millennium, large landowners in the forested part of the tropical lowlands had shifted their business model to exporting sugar, and most extensively, to soybean and oilseed cultivation. This fed into globally orientated supply chains dominated by multinational companies such as Cargill. These processed soy into industrial foods or animal feed for export. The agricultural expansion was further supported by the World Bank, which sought to increase the production and international marketability of Bolivia’s crops. Industrialised agriculture had direct consequences for the ecology and social fabric of the lowlands. Much of the work on the plantations was carried out by Aymara or Quechua migrants from the Andean highlands, who often ended up landless or indebted, therefore becoming dependent on ‘white’ landowning elites. Soy and oilseed cultivation also caused deforestation and an increased use of chemical pesticides, both of which reduced biodiversity. This undermined the livelihood of the indigenous Amazonian peoples of the lowlands.18 The indigenous Guaraní

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people of the gas-producing regions similarly became embroiled in a bitter dispute with the Spanish petroleum company Repsol over land rights and environmental degradation. Andean migrant labourers and indigenous lowland peoples therefore organised themselves politically against foreign firms and their domestic ‘collaborators’.19 The most active political organisers were the Aymara coca growers, among them Evo Morales. Many coca growers had migrated into the lowlands after their erstwhile employment in the highland mines had been terminated in the wake of liberal reforms. They now made a living as small farmers growing coca. However, this was anathema to the United States, who condemned cultivation of the leaf as feeding the drug trade. The Bolivian government cooperated with American anti-drug enforcement and generally took a hard line against the coca growers, destroying crops and driving many from the land. For the Aymara, on the other hand, the ‘sacred leaf’ was not an ingredient into narcotics, but a traditional consumption item of cultural significance. The participation of the United States as a foreign power in the attempts to eradicate the crop further fanned their determination to defend the coca plant.20 The coca growers used their clout in the nearby city of Cochabamba, during the infamous ‘Water War’ of 2000. In line with Goni’s policy of privatisation and with World Bank support, Cochabamba residents had seen their public water company sold to an international consortium involving the USmultinational Bechtel. This disowned the cultivators of the Cochabamba valley from their customary rights to the irrigation canals that watered their fields and exposed the urban residents of the city to steep hikes in water rates. Both groups organised themselves in a communitarian association coordinating demonstrations against the consortium. Cochabamba residents clearly had material reasons for their protest, but the scale of the ensuing demonstrations, which involved a months-long stand-off with riot police and the fatal shootings of protesters, cannot be explained by water charges alone. It was anger over the surrender of water, the ‘source of life’, to foreigners that drove tens of thousands to the streets. This resistance earned Cochabamba residents the support of Bolivians nationwide, as well as turning the city into a monument for globalisation critics around the world. Evo Morales and his coca growers joined the protests, contributing their numbers and militancy. Similar actions eventually spread to other Bolivian cities, including to the poor Aymara satellite settlements surrounding the capital, La Paz. Here the privatisation of water utilities to the French company Suez spurred residents into similar action. After months of protests, the government was forced to annul the water contract in Cochabamba and expel the foreign consortium from the country.21 The peak of the protests came in 2003, when full-scale discontent with the Goni administration erupted. February saw mass actions in La Paz against an

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‘gas for bolivians’: resource nationalism and the environment 275 income tax increase, which was projected to hit the poorest Bolivians hard. The Bolivian government had floated the tax hike following its austerity commitments to the IMF. Once again, it appeared that economic policy sacrificed the Bolivian poor at the behest of foreign institutions.22 Finally, October saw the conflagration of the ‘Gas War’. The ‘Gas War’ was the moment in which the multifaceted grievances surrounding domestic inequality and foreign economic control crystallised around a single issue: the export of natural gas. Extraction of hydrocarbons by foreign firms had accelerated since the privatisations of the 1990s. This was popularly connected to environmental degradation at the drilling sites and the exclusion of local communities from export proceeds. The protest movement of October 2003, however, did not just consist of rural communities directly affected by the drilling. It represented a much wider coalition, including miners, coca growers, water rights activists and campesinos. The majority of the protesters were poor urban Aymara.23 Mobilisation was so intense because the Goni administration allowed foreign companies to build a pipeline exporting Bolivian gas to the United States through a Chilean port. This triggered collective memories of national resistance. First, Bolivia had lost its Pacific ports to Chile after the 1880 war and the thought that the erstwhile enemy would now profit from transit fees in this conquered territory was unacceptable. Second, hydrocarbons were seen as part of a ‘national patrimony’, over which much indigenous blood had been spilled in the 1930s Chaco War. These treasures were not to be exported: ‘Gas neither for Chile nor Peru, but first for Bolivia’ became the protesters’ credo.24 Finally, the insurgents argued that Bolivia’s national patrimony should not be exploited by foreign consortia, who paid low royalties to the Bolivian treasury, of which even smaller sums ever reached the poor. Instead, protesters demanded to nationalise deposits and ‘recover and industrialise gas for Bolivia!’25 Goni’s government, however, was not for accommodating these demands and met the demonstrations with tanks and machine guns, killing scores of protesters and bystanders. Far from quelling the unrest, this further galvanised the demonstrators, whose ranks swelled to the hundreds of thousands. The activists made clear they were committed ‘to fight for the interests of our country and to defend our natural resources’.26 Faced with such popular resistance, Goni was forced to shelve the pipeline plan. He resigned and fled Bolivia for the United States, to be replaced by his deputy, Carlos Mesa. Yet Mesa did not last long either, and was forced from office in 2005 by the same alliance of social movements. The ensuing election was won by Evo Morales and his running mate García Linera. They now faced the difficult task of ‘refounding’ the fractured country.27 The political party headed by Morales was the MAS (‘Movement towards Socialism’), structured less as a traditional party, and more as an umbrella

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organisation for the various groups behind the preceding protest waves. The heterogeneous aims underpinning these social movements required Morales and García Linera to thread carefully. At the same time, the centrality of resource sovereignty in the protests meant that the new government needed to progress quickly on that front. ‘We needed to end that internal colonialism and return the land and its natural resources to those who have lived on it for so many hundreds of years, instead of putting our economy in the hands of the World Bank, the IMF and transnational corporations’, explained Morales one year after taking power.28 The government’s first moves reflected both this impetus to change, and the contradictory impulses behind the diverse grassroots movements. On the one hand, the new administration put heavy emphasis on ‘indigenous’ communities and values, which it distinguished from the ‘colonial’ values of the old Europeanised ruling classes. This signified the national-populist impetus of MAS, which sought to stay in touch with its ‘indigenous’ roots under the charismatic personal leadership of Morales. In Morales’ understanding, the old elites who had sold off natural resources to foreigners had threatened to destroy the ancient economic base of indigenous communities. García Linera endorsed a similar reading, arguing that popular resistance was spurred by ‘indigenous campesinos left to their fate by an entrepreneurial state exclusively dedicated to empower the tiny economic enclaves of a transnational modernity’.29 In its first comprehensive policy document, the National Development Plan (NDP) of 2006, the government therefore disavowed ‘colonial’ notions of export-led growth and resource extraction. Instead it emphasised Andean conceptions of ‘living well’ (vivir bien in Spanish or suma qamaña in Aymara). These embodied the importance of collective stewardship over resources ‘in harmony with the environment and in communion with all human beings’.30 The NDP thus embodied ecological balance and self-sufficiency, rather than linear progress and development.31 However, other sections of the NDP read quite differently. These come under the headings of ‘Productive Bolivia’ and ‘Sovereign Bolivia’. The passages are sharply critical of ‘neoliberal’ globalisation, which caused ‘a continuation of our role as exporters of primary commodities, targets of foreign investment in the extractive sector (mining and hydrocarbons), and a highly dollarised financial system, with an oligopolistic structure’.32 Yet the solution to dependency in these passages is not a return to a pre-colonial age of Andean harmony. Instead, we find plans that are quite reminiscent of the import substitution industrialisation of the 1950s. The document calls for a strengthening of the domestic market and the protection of nascent industries in an effort to move beyond the export of unrefined commodities. Moreover, foreign investment was to be controlled and partially substituted by domestic savings. In old ECLA style, regional integration agreements also

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‘gas for bolivians’: resource nationalism and the environment 277 get a positive mention.33 The objective here is not complete self-sufficiency, and certainly not economic stasis. This is not surprising. After all, many urban protesters in the ‘Gas War’ had emphasised the extraction of gas to fuel Bolivian industry (and hence employment). While there was therefore agreement between the various social movements that commodity export dependence and unregulated foreign investment should be avoided, there was no consensus that resource extraction and industry themselves were undesirable. In fact, some passages of the National Development Plan depict the environment mainly as an economic asset: Bolivia possesses great opportunities . . . among which we can mention: abundant renewable and non-renewable natural resources, a variety of micro-climates and ecosystems (it being one of the countries with the greatest biodiversity in the world and ample potential for biotrade), a wealth in forests, with millions of hectares of certified woodland, organic products and native species with a growing demand on the world market.34

This presentation does stress ‘responsible’ ecological management (certification, organic products, etc.). Yet it clearly incorporates a more developmental conception of natural resources than the spiritual harmony with ‘Mother Earth’ advanced by indigenous intellectuals.35 How did the MAS combine the ‘indigenous’ and ‘developmental’ perspectives on natural resources? The first strategy was anti-elitist rhetoric. Both Morales and García Linera continually juxtaposed their own rule against the ‘crooked oligarchic state’ of the past, which ‘surrendered public goods to foreigners’ for the benefit of ‘small political elites.’36 When Morales nationalised the oil and gas fields, he staged this decision in peronista-style as a media event replete with flags, military personnel and remembrance of the fallen heroes of the 1930s oil war.37 The second strategy, pursued most consistently by García Linera, was to promote the state as protector of indigenous communities, guardian of resources, and motor of development. In other words, the state was to be the congealing agent between the coalition’s diverse interests.38 The same idea of the state as the national guardian against foreign capital had already been proposed by many nationalists, including Sun Yat-sen (Section 5.5) and Kwame Nkrumah (Section 6.3). Like the African Socialists, the MAS infused this new state with indigenous symbolism. Morales initiated proceedings for the drawing up of a new ‘plurinational’ constitution. Passed in 2009, the constitution elevated symbols of indigenous identity and enshrined both the rights of ‘Mother Earth’ and sovereignty over natural resources in law. The latter effectively strengthened the position of the state oil company and eventually the state mining corporation. The state also nurtured industries based on domestic raw materials. This was done through a tight regulation of

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private banks, which were encouraged to lend to local manufacturing enterprises. The Bolivian government also terminated its standby agreements with the IMF and withdrew from the World Bank’s mechanism for international investment arbitration, thus giving it a free hand in managing foreign capital.39 Putting the state at the centre, however, did not entirely eliminate tensions between ‘indigenous’ and ‘developmental’ conceptions of resource use. Most fundamentally, a tension between environmental preservation and resource extraction remained. Previously, the choice had been in the hands of multinational corporations, international lenders and domestic business elites. Now the choice was down to the government. Although many MAS leaders had roots in the environmental movement, these links weakened once power had been secured and activists became politicians.40 Crucially, the very focus on state agency encouraged Morales and García Linera to see like a state and embrace a developmental perspective on natural resources. This is most clearly visible in the heated conflict surrounding the planned development of the Isiboro Sécure National Park and Indigenous Territory (TIPNIS by its acronym in Spanish). As suggested by its name, this area of the eastern lowlands is both a nature preserve and home to several indigenous Amazonian peoples. Seen through the eyes of a developmental state, however, the area was an impassable jungle and as such a barrier to domestic integration and growth.41 García Linera pushed this perspective most forcefully in his 2012 essay Geopolitics of the Amazon, where he argued for an ambitious programme of road building to develop the area. Not only would a ‘highway be like a staple force uniting two regions of the country separated from each other for centuries’, but it would ‘establish the presence of the Bolivian state in the Amazon where, in its absence, what predominates are the existing powers, the landlords and lumber companies (many of them foreigners)’.42 García Linera’s objective was national control over resources: ‘The highway will nationalize a fundamental territorial space in Bolivia, in which foreign governments and companies, foreign citizens and landlords, have held more authority, knowledge and power than the Bolivian state itself.’43 The vice-president briskly dismisses questions of indigenous rights. As the Plurinational Bolivian state is the representative of all indigenous peoples, it is by definition acting in their best interest. This is all the more so given that the indigenous Amazonian peoples have been corrupted by international business interests and foreign environmentalists.44 According to García Linera, these two outside groups form one alliance, whose objective it is to secure their own control over Bolivia’s natural resources. For example, systems of tradeable carbon credits allowed multinational corporations to monetise the conservation of the Amazon. ‘The major enemy of the presence of the protector state in the Amazon region at present is the international imperial-corporate structure’, García Linera explains, ‘which has converted environmental management in the world into the most lucrative deal in favour of the industrialized

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‘gas for bolivians’: resource nationalism and the environment 279 countries of the North and the biotechnology companies’.45 However, environmental protection by foreigners flies in the face of Bolivia’s sovereignty over its natural resources: ‘The Amazon is ours, it belongs to Bolivians, not to North Americans or Europeans, nor to the companies or NGOs that claim to be “teaching us to protect it.” If they want to protect the environment, let them do so with THEIR forests, rivers and hills, and not meddle in how we decide to care for our own natural surroundings.’46 Moreover, García Linera argues that environmentalism as preached by the North limited Bolivia’s own growth prospects. The vice-president stresses that national development depended on continued resource extraction: ‘Isn’t the uncritical condemnation of so-called extractivism in fact seeking to leave the Plurinational State poor and defenceless [?]’47 Environmental conservation was now disqualified, first, because its proponents were seen as foreign agents and, second, because it inhibited the national project of industrialisation. This discursive shift helps to explain the crackdown by the new government against TIPNIS protesters, who marched on La Paz in 2011 to oppose the construction project.48 Their opposition to the developmental aims of the state were now branded ‘anti-national’. The pivot from ‘indigenous’ values to expansionist nationalism is reminiscent of the transformation undergone by Julius Nyerere of Tanzania. He shifted from community-focused ujamaa to an emphasis on growth in the 1970s (Section 6.3). The MAS shifted from community-focussed ‘Mother Earth’ to the ‘Great Industrial Leap’ (Gran salto industrial), a policy announced in 2010. In both contexts, the shift reflected the idea that industry corresponded not only to employment opportunities, but also to national modernisation and prestige.49 This continued to be important in post-colonial nations. The brochure announcing the ‘Great Industrial Leap’ praised Bolivia as a ‘Leading Country’ that used its own raw materials (gas, iron, lithium) to establish advanced industries.50 Feats of engineering based on these industries, including the launching of a communications satellite, were proudly presented as hallmarks of a ‘Great and Industrial Fatherland’.51 Bolivia complemented the obligatory twentieth-century steel smelter with a twenty-first century lithium battery plant, but the underlying nationalist impulse remains comparable. In reality, Bolivia’s capacity for autonomous industrial development was limited, as it had been for many post-colonial nations facing the Nationalist Dilemma. Bolivia’s population was numerically small (barely exceeding ten million) and overwhelmingly poor, thus limiting the extent of the domestic market. The technological capabilities of state firms in mining and petroleum, having been gutted by years of austerity, were also underdeveloped. Raw material inputs for industry were available locally, but capital, skilled workers and technology needed to be largely provided by external sources. Morales therefore needed to maintain some openness to foreign investment.52 While the administration gave preference to investors from developing countries,

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namely from India, China and Brazil, this did not limit foreign exposure per se. In addition, the maintenance of some mining operations required the establishment of good relations with corporations from the North, including Swiss mining giant Glencore. Although the company was forced into a partnership with Bolivia’s state mining corporation, García Linera extended Glencore’s contracts for zinc mining operations in 2013. Morales’ public rhetoric notwithstanding, the government privately provided investors with assurances that their operations would not be threatened.53 The continued dominance of foreign capital in mining also affected Bolivia’s economic strategy more generally. Transnational corporations did not invest in the country to supply its fledgling domestic industry. Their profits came from commodity exports, thus prolonging the old model of commodity exports that García Linera and Morales had attacked as ‘colonial’. Yet the attractiveness of this outward orientation was hard to beat given the boom in commodity prices until 2013. This boom eased Bolivia’s fiscal problems and generated revenue that could be invested in ambitious industrial projects. Naturally, it also increased incentives to extract resources and to compromise on environmental protection. The government approved more drilling permits for oil and gas in protected areas, thus igniting fears by local communities over water pollution. It also expanded the mining of lithium, despite fears that its extraction would lead to a chemical contamination of land and water.54 Apart from economic factors, social objectives also prolonged Bolivia’s dependence on commodity exports. Oil and gas exploitation is capital-intensive, as were many of the advanced industries envisaged by the development plans. This limited job creation from these sectors. In order to combat poverty and to maintain his electoral base Morales needed to complement job creation with an extension of public services and transfers. In this area, his government made its most impressive progress. Yet the fiscal funds for these social programmes could only come from natural resource exports, again privileging commodity extraction.55 Finally, the necessity to craft political alliances also boosted resource extraction. The staunchest opposition to the MAS government came from the old planter elites of the eastern lowlands. Many resented the incorporation of indigenous representatives into the new government and the social reform they feared this would bring. As large-scale exporters of agricultural commodities, they neither had a stake in environmental protection nor in a ‘Great Industrial Leap’. These agrarians stoked a separatist movement in the east, which was only diffused after a long political conflict with the central authorities.56 As part of the informal compromise calming the situation, Morales’ government gave the eastern landowners a de facto free hand in managing labour and environmental issues on their estates. As a result, exportoriented monoculture, especially soy, continued unabated in the east. This led to deforestation, soil degradation and heavy use of chemical pest controls. Moreover, many soy-producing estates have been bought up by foreign

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(Brazilian) investors looking to export cheap animal fodder, thus strengthening the role of export interests.57 In a country replete with isolationist movements, the internationalisation of the Bolivian economy has provoked resistance from the streets, with many activists accusing the government of having broken its promises. Morales’ extractivist policies also elicited dissent from indigenous intellectuals, who saw them as a distortion of true Andean beliefs in a natural balance.58 Bolivia’s economic model by 2015 was led neither by the indigenous idea of ‘Mother Earth’ nor by inward-oriented industrialisation. The MAS-government ended up with a model of resource extraction that was essentially export-focussed. ‘Today we export three times more in volume than in 2005 and this speaks of a mining country’, García Linera admitted in 2012, but added that ‘Bolivia lives off its gas but also off mining and we are proud of it’.59 For all its compromises, Bolivia’s export model still remained connected to funding national goals, especially industrialisation. The role of the state in the management and ownership of resources also distinguishes it from previous liberal regimes. However, the degree to which the state could act as ‘caretaker’ of indigenous communities and the environment was clearly fraught. Perhaps by way of compensation, the MAS government dialled up its use of isolationist rhetoric as its economic policy became more expansionist. The ‘Patriotic Agenda 2025’ (published in 2014 as a ten-year economic plan) framed ten out of thirteen policy areas as a defence of ‘sovereignty’.60 The plan bristled with exhortations to guard against ‘financial servitude’, and even includes a claim to the resource-rich coastline lost to Chile in 1880.61 It exalted the previous nationalisations as the ‘liberation of the land, the mines, the hydrocarbons and all of our natural resources from the shackles of capitalist colonialism, liberalism, and the neoliberalism of the landlords’.62 This was despite the limited extent of these nationalisations and despite the arrangement the MAS had in the meantime reached with both international capitalism and landlords. Yet this propaganda remained important in a country with an electorate deeply committed to local ownership over natural resources. For a surprisingly long amount of time, this public relations strategy seems to have worked. Morales and García Linera held their fracturing coalition together until 2019, when allegations surrounding possible electoral fraud forced their resignation. Their MAS party, however, bounced back strongly at the polls one year later and claimed the presidency once more.63 Resource nationalism remains a powerful mobiliser.

8.3 The Fragmenting European Union The Brexit referendum on 23 June 2016 initiated the exit of the United Kingdom from the European Union, marking one of the key moments in the resurgence of economic nationalism in the early twenty-first century. Yet the

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British exit was only one of several crises that threatened the project of European unity during this period. These included anti-austerity protests in the Mediterranean countries, a reassertion of economic sovereignty in Hungary and Poland, and the return of financial nationalism to Germany. In all these cases nationalist movements challenged the supranational governance and market integration for which the EU stands. This has not always been the case. From its inception, the European project was conceived and executed by the governments of nation-states. Membership in the EU and its predecessor organisations has therefore often been consistent with the pursuit of nationalist economic objectives, be it the protection of agriculture, the nurturing of industrial champions or the access to export markets.64 Postwar European governments pursued regional cooperation through EU-institutions because it furthered these objectives. Yet the positive relationship between the EU and the nation-state changed profoundly between the 1990s and 2010s. This section explores three reasons for this change, focusing mostly on the rise of right-wing Eurosceptic movements in Britain, Germany and Hungary. The first reason for increased Euroscepticism was the transformation of the EU from a mostly intergovernmental organisation to an institution endowed with supranational authority. The Maastricht Treaty of 1992 ushered in a degree of integration that many nationalists thought threatening to economic sovereignty. This prepared the ground for anti-EU parties such as the UK Independence Party (UKIP) in Britain. Second, the aftershocks of the global financial crisis of 2008, in particular the eurozone debt crisis, pitted governments of northern European countries against those in the south, bringing national animosities surrounding austerity to the foreground. In Germany, the result was the rise of the Alternative for Germany (AfD) as a strongly Eurosceptic party seeking to abolish the common currency. The crises also animated the Hungarian government under Viktor Orbán (1963–) to radically crack down on foreign banks in the country. Third, increasing migration, both from within the EU and increasingly from beyond, radicalised nationalist movements in all three countries, and played a particularly prominent role in the Brexit vote.65 The movements surveyed here are right-wing movements. On the left, Euroscepticism runs deep as well. Some left-wing intellectuals see the EU as an agent of neoliberal globalisation that undermines national welfare states. Disillusionment with the EU then leads to calls for the restoration of nationstates as the only institution that can protect workers’ rights. Examples include the resistance by the Greek party Syriza against public spending cuts in the debtor countries of the eurozone crisis. In Germany, Wolfgang Streeck is a prominent left-wing intellectual who has attacked the EU from a ‘national’ perspective.66 While the nationalism of the European left tends to be a fallback option, this is different for the radical right. The starting point for those on the radical right always is the nation, and opposition to the EU flows from the

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emasculation of national autonomy by the EU. This form of Euroscepticism has therefore been much more virulent than dissent from the left. It has also exhibited greater mobilising potential. Nonetheless, there are deep fissures even within the right-wing Eurosceptic camp. Isolationists dislike the EU for its liberalising efforts, especially for dismantling barriers to migration. Expansionists present the EU not as a liberaliser, but as an intrusive regulatory machine stifling national competitiveness. These divergent attitudes reflect the different constituencies on which radical right-wing parties draw.67 As a result of this tension, these parties have been surprisingly hesitant to commit themselves to policy stances usually associated with economic nationalism, such as protectionism and industrial policy. *

There are two different stories that explain the postwar European project. In one, the Union commenced as a political project conceived by far-sighted politicians such as Robert Schuman (1886–1963) and Konrad Adenauer (1876–1967), who were determined to avoid the horrors of another war. In this reading, which has been invoked with some frequency by leading European politicians to this day, the single market and common currency are political imperatives without which the continent would slide back into the strife that marked its darkest periods.68 The alternative story is decidedly more Listian. In its most prosaic rendering, it pictures postwar European leaders as balancing two basic economic imperatives. First, European politicians sought to expand their domestic manufacturing base. In light of the superior competitiveness of American industry after the war, this called for protection. On the other hand, leaders also recognised that their national markets were becoming too small to sustain industries with ever larger capital requirements. Sustained industrialisation therefore required some access to foreign markets. European integration, in particular the creation of a customs union with the Treaty of Rome in 1958, offered a way of balancing these opposing aims. Free trade within the customs union gave enterprises access to the European markets they needed to prosper. At the same time, the union’s external tariff barriers shielded them from American (and later Japanese) competition.69 Readers will recognise that this story is yet another rendering of the Nationalist Dilemma, and that regional integration has been a standard way for nationalists to avoid the constraints of small domestic markets since Friedrich List called for economic unions in the early nineteenth century (Section 3.5). The economic motive for integration in postwar Western Europe is therefore not too different from the calls for Latin American unity emanating from ECLA’s Raúl Prebisch (Section 6.2), or those voiced by Pan-Africanists such as Kwame Nkrumah (Section 6.3).

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This does not mean that the EU is just a reiteration of the nineteenth-century Zollverein (which in List’s writing boiled down to an instrument of German hegemony, and in actual fact was largely a tool of Prussian expansion).70 Neither does it imply that political ideals were unimportant to the European project. Most calls for regional economic integration, including those by Prebisch and Nkrumah, have been accompanied by some claim to a shared political identity among participating countries. This was no different in postwar Europe. Arguments advocating regional integration based on economic nationalism are therefore quite compatible with arguments based on political ideals. An early prophet of European cooperation such as Jean Monnet (1888–1979) could both be an honest visionary of European peace and a meticulous drafter of French industrial policy. Where Europe differed from other regions was that the political framing of a shared destiny after the devastation of continental carnage was more powerful than elsewhere. The fact that European integration in the first postwar decades was able to advance quicker than in Latin America or Africa attests to this fact.71 European ideals were underwritten by additional political imperatives. French security required a degree of control over German coal and steel production, and Germany’s renaissance as a nation-state so soon after its armies had rampaged through the continent was only possible within a European framework.72 Many other policies coordinated at the European level also point towards their origin in national economic goals. The protectionism of the Common Agricultural Policy (CAP) introduced in 1962 is an obvious example. Farmers are of course a well-organised pressure group, and this accounts in part for the large sums spent on Europe’s rural denizens under the CAP. But nationalist motives matter too. The dislocations of war had hammered home the importance of food security to European decision makers, and agricultural selfsufficiency became an important motive for protecting farmers. Moreover, the romantic image of the farmer as the backbone of a healthy national economy appealed as much to some postwar Europeans as it had to Paul Cauwès and Adolph Wagner seventy years earlier (Section 4.2). The CAP required nation-states to delegate some authority to the European level, but in return they achieved (or overachieved, in the eyes of the CAP’s critics) selfreliance in foods.73 European integration also allowed governments and enterprises to pool resources for funding industrial projects that might otherwise have been unattainable. Politicians and business executives in the late 1980s worried about sluggish European competitiveness in comparison to the rapidly growing presence of American and Japanese firms in high-tech industries. As a result, the European Commission under Jacques Delors (1925–) initiated an extensive programme of investment in research and development that he hoped would restore Europe’s place at the technology frontier.74 Cooperation at the enterprise level within Europe, most notably within the Airbus

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consortium since the 1970s, has drawn on similar motivations. Airbus has amalgamated French, German and Spanish national champions, and this has allowed the joint enterprise to remain successful in the sharply competitive aerospace industry against its US-based rival Boeing.75 Why then did the postwar acquiescence of nationalists with European integration cool down in the 1990s and turn to open hostility in the new millennium? Interpreting European integration as one solution to the Nationalist Dilemma allows us to make sense of this change in perceptions. In short, deepening economic integration since the late 1980s dismantled national borders beyond a degree that nationalists considered acceptable, especially as the compensation for this ‘sacrifice’ in terms of increased export opportunities seemed insufficient. This is only in part a contradiction. The Single European Act, with its purpose of creating a unified market by 1992, eventually led to the famous ‘four freedoms’: the free movement of goods, services, capital and labour within the Union. The movement of goods was not new – this had been the objective of the Treaty of Rome – but the other freedoms proved less palatable to nationalists. The benefits of the free movement of capital seemed confined to a small group of financiers. Its ‘costs’, especially the takeover of domestic firms by foreign businesses, were widely debated in the press and weighed heavily on nationalist sensitivities. The free movement of labour, as would become clear, was even more explosive. Immigration from other EU countries became a very visible manifestation of cross-border integration, sometimes inciting nativist resistance. This resistance drew not only on cultural fears, but also on economic motives. Foreigners were seen as competing with native workers for jobs, a concern that was sharpened by rising unemployment rates in some countries in the 1990s. As EU migrants were increasingly allowed to avail themselves of social services in their host countries, this also stoked fears that immigration could overwhelm domestic welfare states. These sentiments were increasingly applied to nonEuropean migrants as well, whose entry was also pinned on the EU. To these isolationist nationalists, the EU of the Single Market is a liberal agent of globalisation that decreases native incomes by eroding national borders. The assumption that European integration benefits only the elites (capital owners, employers of migrant labourers and politicians) rather than the common worker has lent this brand of Euroscepticism its populist tinge. In the words of Hungary’s Viktor Orbán, it was ‘elite European politicians’ who ‘deliberately [brought] millions of migrants to Europe’.76 However, it was not only deepening integration that pushed nationalists out of their comfort zone. Accelerating integration also increased the amount of control national governments delegated to Brussels. ‘Back in 1972, we were told we were joining a “common market”’, complained the Brexiteers of UKIP one year before the referendum, ‘what we actually joined was a supranational political union’.77 Eurosceptics have been keen to blame this on the

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‘undemocratic’ activism of European bureaucrats, who supposedly arrogated for themselves an ever-widening sphere of authority over the daily lives of Europeans. This is, at best, a half-truth. The process of ‘ordered’ market integration, as understood by the EU, required the harmonisation of product standards between member states and increasing control over competition and regulatory policies. Moreover, it was of course national governments who deliberatively transferred these competencies. Nonetheless, the signing of the Maastricht Treaty in 1992 was seen as the decisive turning point in nationalist circles. The Treaty transformed the European Economic Community into the European Union, with the dropping of the word ‘economic’ signifying the increasing political aspirations of the project. It also increasingly transformed the organs of the Union into supranational, rather than intergovernmental, institutions. Most significantly, Maastricht paved the way for the euro as the common European currency. Those member states who advanced with monetary union surrendered their monetary autonomy to a shared institution, the European Central Bank (ECB). While these developments may not have mattered much for those Europeans who placed a low value on sovereignty, they did matter for many nationalists.78 This group of Eurosceptics is decidedly more expansionist than those opposing open borders. These nationalists do not see the EU as a liberalising force, but instead oppose what they see as intrusive regulation emanating from a nascent European ‘superstate’. Being economic liberals themselves, they fear that this regulation stifles growth. Paradoxically then, the process of European integration after Maastricht has provoked resistance both from those who depict the EU as too liberal, as well as from those who criticise its supposed regulatory overreach.79 What unites both groups is the idea that European integration is incompatible with nationalist objectives, be they isolationist or expansionist. The galvanising power of Maastricht for the radical right can be seen by briefly tracing the origin stories of UKIP and the German AfD, two leading Eurosceptic parties. The AfD, as it was founded in 2013, built seamlessly on earlier critiques against monetary union formulated by prominent German economists in the 1990s. While these academics marshalled complex economic and legal arguments against the euro, their disquiet at the abolition of the Deutschmark went deeper than concerns about theoretical models and legalities. For much of the postwar era, the Deutschmark had been the symbol of German economic prowess and the Wirtschaftswunder (economic miracle). The strength of the currency stood for Germany’s influence in the world, both against the United States who was struggling with a weakening dollar in the 1970s and against the other European countries who unsuccessfully attempted to reach the parity set by the Bundesbank in the 1980s. In German eyes, the sound management of their currency embodied ‘German’ values: order, discipline, frugality. In

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a country where other forms of nationalism were closely circumscribed after the war, ‘Deutschmark-Nationalismus’ was one of the few acceptable outlets. Although few Germans were probably aware of it, ‘DeutschmarkNationalismus’ came remarkably close to Adam Müller’s idea that the coin of the realm should serve as the depository of the ‘national spirit’ (Section 3.3). European Monetary Union now threatened to upend Germany’s cherished national asset. Whilst the euro was unpopular in Germany, however, no major political party opposed its introduction in 1999. Most politicians understood European monetary integration had been a precondition for German unification after the fall of the Berlin Wall.80 In Britain, resistance against abandoning the traditional currency had stronger political backing. The pound had been the anchor currency of the nineteenth-century gold standard, symbol of Britain’s vaunted imperial age. ‘Keep the Pound’ became the rallying cry of the right-wing faction of Britain’s Conservative Party in the early 2000s. UKIP similarly opposed monetary union, but its early programme after foundation also opposed the transfer of ‘sovereignty’ to Brussels more broadly. UKIP was founded (just like the AfD would later be) by a disgruntled academic, in this case London School of Economics Professor Alan Sked (1947–). He was primarily motivated by opposition to the Maastricht Treaty, which he felt would lead to Britain ‘becoming a province of a united European superstate’.81 Whilst they were certainly vocal, the early Eurosceptics had little direct impact. A few German professors did not stop the adoption of the euro, and Sked’s UKIP performed dismally at the polls. Even insiders of the British Conservative Party such as future Prime Minister David Cameron (1966–) lambasted the ‘Keep the Pound’ campaign of his traditionalist colleagues. While they were stubbornly ‘banging on about Europe’, Cameron opined, the Tories were ignoring the bread-and-butter issues most voters cared about. In East-Central Europe, meanwhile, Euroscepticism was also muted. Former communist countries such as Poland and Hungary invited European firms to invest in local manufacturing, while they themselves prepared to join the EU. Nationalist opposition to European unification was still a fringe issue in most countries in the 1990s. However, two factors rekindled the Eurosceptic cause. The first was the global financial crisis starting in 2008, and the second a surge in migration culminating in the 2015 refugee crisis. These developments did not create opposition to the EU, but they radicalised it, and gave it wide popular appeal.82 The financial crisis that commenced in 2008 has reinforced nationalist disaffection with the European project, but it has done so mostly indirectly. Moreover, the magnitude of these effects did not become clear until a few years later, because the immediate consequences of the crisis for Euroscepticism were small. The crisis put domestic governments once again in the driving seat, as they initiated fiscal stimulus packages and protected their financial systems

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through deposit guarantees and the bailout of banks. These measures were not always well-coordinated at the European level, but a lack of cross-country coordination is not per se ‘nationalist’. And while trade volumes fell as global GDP contracted, there was little recourse to tariffs and capital controls, unlike the response to the Great Depression of the 1930s. Policymakers remained committed to open borders and electorates broadly agreed. In Europe, the incomes of those laid off by the recession were partially cushioned by welfare states, so that the disaffected did not immediately flock to the polls to support the extreme right, as had happened in the 1930s.83 The balance shifted once the financial crisis became a sovereign debt crisis. This occurred in the southern member states of the eurozone and Ireland, countries that had seen large capital inflows after the creation of monetary union. This led to mounting private debts on the European periphery, the assumption of which would have overwhelmed the treasuries of these member states, especially as private capital inflows dried up quickly during the crisis. Many governments therefore appealed to the EU and the IMF for financial assistance in 2010. This assistance came with harsh strings attached, and required a large reduction in public spending. The cuts to public services and rising unemployment led to vicious protests against the EU institutions that were associated with these austerity measures. Much of this opposition came from parties on the left of the political spectrum, who sometimes framed their Euroscepticism in ‘national’ terms.84 Yet it is important not to overemphasise the nationalist fallout from the eurozone crisis in the indebted countries. While many governments fell during the crisis, the new cabinets were not always more ‘radical’ or ‘populist’ than their predecessors. Greece is a partial exception, where both the extreme left and right gained massively at the polls, and in 2015 formed a government under Syriza’s leadership that attempted to challenge the economic ‘diktat’ imposed by the IMF and European institutions. Yet this was an exception, and a brief one at that. In Italy, the populist Silvio Berlusconi was ousted in favour of a centrist technocratic administration. In Spain, the moderate left-wing populists of Podemos did not gain a share of power at the national level until 2019. And one of the same two parties that have governed Ireland since independence has remained in power after the crisis. While voters in these debtor countries might chafe at austerity ‘imposed’ by Germany and its frugal northern allies, the very fact that they might require continuous financial assistance from the Union underscored that exit was not an economically viable option.85 Some of the strongest nationalist reactions to the financial crisis came from countries that were not members of the eurozone. Hungary, which had kept its own currency (the forint) is a case in point. Prior to 2008, Hungary was one of the most open economies in the world. Its manufacturing sector was tightly integrated into the transnational production chains of German and French car producers. Hungary’s banks were also largely foreign-owned, and lent in

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foreign currency to domestic consumers and homebuyers. This became a problem when foreign capital was quickly withdrawn from the country during the financial crisis.86 As the forint plunged, Hungarian home owners were faced with skyrocketing costs of servicing their foreign currency mortgages. Moreover, the government reacted to deteriorating public finances by turning to austerity packages chaperoned by the EU and IMF. These developments provided an opening for Viktor Orbán. A previously moderately conservative politician, he decided to run a bitter electoral campaign under the promise of ‘economic self-rule’ in 2010. Having come to power, Orbán proclaimed that ‘we have had enough of the politics that is forever concerned with how we might satisfy the West, the bankers, big capital and the foreign press . . . Hungary will not succumb again!’ He subsequently followed a strict policy of financial nationalism. Orbán taxed the mostly foreign banks heavily and obliged them to convert loans denominated in foreign currency into forint at sub-market rates. He also nationalised foreign currency denominated pension funds, and supported the takeover of foreign banking assets by an emerging class of Hungarian ‘national capitalists’. In order to enact these reforms, Orbán squashed two sources of potential opposition. First, he tightened government control over the Hungarian central bank, which he designated a domestic agent of foreign capitalists. Second, the government rapidly paid back its obligations to the IMF, and subsequently severed ties with the international organisation. Orbán was equally dismissive of EU interference in economic policy: ‘the grand work of restructuring the Hungarian economy’, he claimed in 2013, ‘could not be prevented by outsiders, either from the capitals of other European Union member states or from Brussels’. The Hungarian prime minister remained a thorn in the side of the Union, sniping from the sidelines at any further prospects of integration, including the EU-wide banking union. Orbán’s radical rhetoric has meanwhile become a source of inspiration for the European far-right.87 Financial nationalism was also on the rise in countries that were part of the eurozone, but as creditors. The rise of the populist AfD in Germany occurred despite the country’s rapid recovery from the financial crisis and despite the fact that as the eurozone’s largest creditor, Germany was hardly at risk of having its economic policy ‘dictated’ by EU organs. However, the eurozone crisis reinforced the sentiment, long held among German right-wing intellectuals, that giving up the Deutschmark had been a mistake and that this mistake would put German taxpayer money on the line. The founders of the AfD, among them many economics professors such as Bernd Lucke (1962–), were able to build on this sentiment when they positioned their new party in strong opposition to the euro in 2013. Despite its subsequent shift towards an anti-immigration platform, the party has prominently maintained this stance.88 For example, the official AfD manifesto for the parliamentary elections of 2021 still devotes as much space to the euro as it does to migration. In addition, hard-line

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Eurosceptic points are littered throughout the document. These fall into several categories. Fundamentally, the party argues, there exists no European people. Any transfer of competencies to the European level therefore entails a loss of sovereignty. True to German ‘Deutschmark-Nationalismus’, the AfD believes that money makes nations: ‘[Only] through national currencies will each state again be responsible for its own economic, monetary and financial policies and thereby regain its political sovereignty.’89 The remaining arguments are more practical in nature and are designed to show how the EU handicaps the German economy. For one, the EU is depicted as a regulatory ‘superstate’, whose excessive bureaucracy stifles the German middle classes.90 Moreover, the permissive monetary policy of the ECB, which lacks the financial rectitude of the good old Bundesbank, has led to low interest rates which ‘dispossess savers, tenants and pensioners and lead over the long term to old age poverty’.91 The resulting low exchange rate of the euro only aids a few large exporters, but not alas, the majority of the German people.92 If Germany were to regain monetary sovereignty, the AfD predicts, Germany’s currency would strengthen rapidly ‘commensurate with the strong competitiveness of the German economy’.93 At present, however, the euro drains money from the country. In particular, the commitment by Germany’s mainstream parties to support ‘destitute’ southern eurozone countries has left German tax payers to foot the bill. As a consequence, ‘[w]e want to abolish the “transfer union” and once again introduce a national currency’.94 The example of the AfD shows how radical Eurosceptic parties support their nationalist narrative (sovereignty matters) with economic arguments (EU membership hurts incomes). The far-right have therefore managed to intertwine abstract concepts such as sovereignty with the bread-and-butter issues that David Cameron had found lacking in the Eurosceptic programme a decade earlier. David Cameron played his own part in supplying the radical right with bread-and-butter issues. His government, in power in Britain after 2010, reacted to the financial crisis by introducing sweeping austerity policies that reduced public service provision across the country. This handed UKIP, and later the Leave campaign during the Brexit referendum, a golden opportunity to collect votes among the disaffected. Like the AfD, the British populists did not blame the country’s economic woes on domestic factors (although UKIP has been sharply critical of Britain’s ‘establishment parties’). Instead, it linked austerity to EU membership. This was despite the fact that Britain, which was never a member of the eurozone, did not have its macroeconomic policies influenced by Brussels or the ECB. Even so, UKIP zoomed in on Britain’s annual contributions to the EU budget. For example, in its comprehensive manifesto for the 2015 general election, UKIP claimed that ‘taxpayers could get so much better value for their money if we left the EU’. Retained funds would be invested locally in health care, police forces, defence and tax cuts.95 The same message featured prominently on the side of the Leave campaign bus in

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the Brexit referendum one year later: ‘We send the EU £350 million a week – let’s fund our NHS [National Health Service] instead.’ The instigator in this case was Boris Johnson (1964–), the later Eurosceptic Conservative prime minister, but the message was in line with UKIP’s talking points.96 The British populists not only pinned domestic problems on the money the EU drained from hard-working Britons, but also on European overregulation. In its election manifesto, UKIP claims that ‘[t]he tentacles of the EU stretch into almost every area of our British life. The EU has complete control over British financial services, fishing, farming, energy and trade. It dictates UK business and employment legislation and immigration rules’.97 While the EU has crushed honest middling businesses, according to UKIP, it has gone easy on ‘a few multi-national corporations’ which ‘have been able to access all the benefits of our thriving British consumer market without making a proper contribution to the costs of British society’.98 In other words, European unification is a project benefiting global elites – Eurocrats, big capital and of course the ‘colluding’ political parties who have sold out the common man to transnational interests. ‘The inconvenient truth for our Europhile political class’, the manifesto states with populist verve, ‘is that political union offers no advantages to trade’.99 Just like the AfD, the British populists successfully combine pro-sovereignty messages with voters’ everyday concerns on employment, health and welfare. There was of course never an attempt at a full appraisal of the balance sheet of EU membership, which had still been a concern for both parties’ academic founding generations. By the mid-2000s, the purpose was to maximise popular support, rather than accurate accounting.100 The populists’ ability to craft resounding soundbites becomes even more evident in their opposition to migration, the second factor that catapulted their parties into the limelight. In shaping public perceptions of migration, populists mingled two issues that, from a legal standpoint, were quite distinct. One was the free movement of EU citizens within the Union, which was one of the core provisions of the single market. The other issue was the surge in refugees from predominantly Muslim countries, which intensified during the Syrian Civil War, reaching its peak in 2015. The populists’ opposition to migration fused nativist apprehensions about the entry of culturally ‘different’ refugees with economic concerns. The latter centred around the possible displacement of native workers by immigrants and the strain migrants would supposedly place on the welfare state. Crucially, both types of concerns were tied together by the overarching idea that exit from the EU and an improved control over national borders would avert the crisis.101 Migration became an especially pressing issue in Germany, one of the largest receiving countries of refugees. Although the decision to admit (mainly Syrian) refugees was made by Chancellor Angela Merkel (1954–) without consulting her EU partners, the influx of migrants could nonetheless be

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presented as a failure by the EU to control the common borders. In 2015, the old guard of economically liberal academics who had founded the AfD were pushed aside by more radical elements, accelerating the party’s drift to the extreme right.102 By the time of the 2021 parliamentary elections, agitation against the ‘threat’ of Islam and the pledge to ‘preserve the cultural identity of Germany’ occupied a large portion of the party’s platform.103 Nonetheless, it also linked migration to EU-related economic concerns by campaigning to ‘limit the immigration of EU foreigners into our social welfare system’.104 As it sharpened its anti-migrant messaging, the AfD’s electoral fortunes rose. Because it has adopted this popular nativist platform without dropping its older opinions on monetary nationalism, it has successfully introduced antieuro talking points to a larger share of the electorate than might otherwise have been the case.105 Migration similarly proved to be a vote winner for Nigel Farage (1964–) when he became leader of a struggling UKIP in 2006. By connecting the EU to fears of migration, he expanded the party’s support base beyond its Eurosceptic core. The party focussed on two economic arguments. First, reasserting the ‘sovereign right to control our own borders’ would mean ‘ending the current “open door” arrangement for European labour that has driven down wages in recent years’.106 EU citizens were also blamed for native unemployment: ‘EU migrants are more likely to be in work in Britain than Britons themselves . . . it is clear remaining in the EU is not favourable to British workers.’107 Second, UKIP blamed immigration for the increasing strain on public services. Britain’s source of pride, the National Health Service, received special attention from the party. By curtailing the access of EU citizens to hospitals, the party claimed, ‘UKIP will put the national back into our national health service’.108 In addition, the manifesto also includes dog-whistles to nativist sentiment by alluding to the ‘rising birth rates (particularly to immigrant mothers)’.109 Since the nineteenth century, nationalists have always been concerned about demographics, but in multi-racial Britain such allusions carry explosive potential. During the Brexit campaign, an unofficial division of labour therefore emerged between ‘respectable’ Leavers, mainly from the Conservative Party, and Farage’s more radical UKIP. The official Leave campaign focussed on the economic impact of EU migration, citing shortages on the housing market and bottlenecks in the NHS as its main consequences. Farage and his fringe supporters were then free to zoom in on the supposed threat from Muslim refugees, which was blamed on the EU’s incompetence at controlling its borders. It did not matter that, for Britain, the distribution of refugees had little to do with the EU given that the country was not a member of the Schengen Area.110 Brexit was in part a revolt against open borders, and the EU was simply seen as complicit in this situation.

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To a large extent Brexit and other right-wing Eurosceptics were therefore a reaction to globalisation, similar to the rise of Donald Trump in the United States.111 However, there are important differences between populists on either side of the Atlantic. Trump’s programme, as we will see later in this chapter, was indeed a full-scale assault on open borders, encompassing migration and trade policy. It was also motivated by competition from China, a threat Trump attempted to counter through an industrial policy in defence-related sectors. Many of these elements are missing in Eurosceptic programmes. In most cases, Europeans limit their economic nationalism to monetary sovereignty and to migration controls (which are partially culturally motivated anyway). There are few calls for tariff protection, industrial policy, and scarcely a mention of confronting China. For example, the AfD denounces efforts by the German state to ‘directly influence enterprises and innovations and attempts to influence economic activity through subsidies’. Instead of ‘socialist industrial policy’, the role of the state is to be reduced to a bare minimum, encompassing just infrastructure, competition policy and education.112 There is no mention of protectionism and trade with China is advocated, although cautiously so.113 Despite his financial nationalism, Hungary’s Viktor Orbán has also tried to maintain and even expand trade in physical goods. Although he has increased the involvement of the Hungarian state in the economy, he has not attempted to push out foreign car producers. Quite the opposite, under his tenure Hungary has actively wooed record-breaking sums of foreign investment, much of which has been invested in enterprises exporting to other European countries.114 Brexiteers have similarly professed that exiting the EU does not mean that Britain will turn inward. UKIP claimed that Britain would continue to export to the EU’s single market. Moreover, Leavers have continuously argued that freeing Britain from the shackles of the Union will allow it to trade more, by becoming ‘a major player in global trade’, a free-trading ‘Global Britain’.115 The protracted negotiations between the British government and the EU have revealed that these claims were, at best, unrealistic. The EU has not provided Britain with ready access to its markets given that British negotiators were not prepared to accept the obligations that come with these export opportunities, including the free movement of people and regulatory oversight. In addition, the British government has not found it easy to strike trade deals with other countries, as long as its relationship with the EU was unresolved.116 From a historical perspective, the British dithering between the three choices of national isolation, regional integration and global free trade are a farcical repeat of its tragic interwar choices (Section 5.2). Nonetheless, it remains true that the Leave campaign did not rest on a call for self-sufficiency.

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This raises a puzzle. If Euroscepticism is really a revolt by those left behind in a hypercompetitive global economy, why was this revolt so narrow in its aims? Gaining policy autonomy from the EU is of course a necessary first step before more comprehensive protectionist measures can be taken, because countries cannot use tariff policy while they are part of the EU.117 But neither can they restrict intra-Union migration as EU members. It is therefore not clear why Eurosceptics would campaign to recover control over borders in order to shut out people, but not goods. Moreover, policy in post-Brexit Britain has distinguished itself by its lack of direction, but not by a resolute pivot towards protectionism. It is likely that many of those who follow Eurosceptic groups understand these groups to be more radical than portrayed by their official party line. UKIP’s campaign posters appeal to anti-globalist sentiments more forcefully than their polished party documents. Viktor Orbán’s radical rhetoric, with its antisemitic undertones, is more revealing than the official pronouncements of the Hungarian government.118 The same is true for the AfD, and is neatly illustrated by some of the groups close to the party. One of these is the ‘Friedrich List Society’, founded by two members of parliament for the AfD in 2019. Reading its policy papers makes clear that the society has little to do with the nineteenth-century infant industry arguments of List, but a lot with the conspiracy-laden financial theories of Gottfried Feder popular in the 1920s and 1930s (Section 5.3).119 The society’s fulminations against the ‘global financial market oligarchy’ and George Soros, as well as its calls to strengthen the national economy by firing ‘globalist’ corporate managers in favour of those ‘loyal’ to the national cause go much further than anything in the party’s official programme.120 Yet even this document of extremism recognises that ‘Germany as an exporting nation is dependent on free trade in goods and services without barriers in the form of tariffs or quotas’.121 This quote suggests that even for extremists, the Nationalist Dilemma still matters. Eurosceptic agitators may rail against global elites and cherish economic sovereignty, but they also recognise that trade is important for the prosperity of their nations. European countries are smaller and to a much larger degree dependent on trade than the United States. Blue-collar workers in some countries, such as Germany, have also benefited from exporting highend manufactured goods to China. Moreover, European welfare states provide some cushion to negative trade shocks. The idea that trade provides opportunities, rather than just threats, therefore finds broader acceptance in some European countries than in the United States.122 This is not to say that all voters for Eurosceptic parties are free traders. Even in Europe, many workers have been displaced by Chinese import competition, and these may provide rich pickings for budding populists.123 These isolationist voters are unlikely to prefer a ‘Global Britain’ or free-trading Germany.

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However, political tensions within Eurosceptic movements prevent these parties from fully catering to existing protectionist demands. Many Eurosceptic parties need to strike a precarious balance between two groups. On the one side, there are the isolationist working-class voters, some of whom may be threatened by import competition. On the other side, there are middleclass voters, often small business owners, who generally resent bureaucracy and favour free trade. An explicit commitment to protectionism could shatter this coalition. It is safer for Eurosceptics to magnify those issues that resonate broadly among all their supporters, such as the supposed dangers posed by immigrants or the glory of the Deutschmark.124 This political perspective also helps us understand why Eurosceptics have been loath to embrace industrial policy (former socialist countries such as Hungary being an exception). Policies designed to nurture national champions are likely to benefit large corporations, their institutional shareholders and possibly bureaucrats. These ‘elites’ are not the principal voters of populist parties like the AfD, who rely on working-class support and small entrepreneurs.125 In fact, it has been the Europhile governments of France and Germany, and even some EU organs, who have increasingly advocated the use of industrial policy. This is therefore not a policy space Eurosceptic parties wish to occupy. Nonetheless, industrial policy has made a comeback within Europe, but it has been championed by centralist governments, not the populist right. Two factors caused this trend, the most important of which was pressure from China. In the late 2010s, European policymakers increasingly worried about the acceleration of state aid to Chinese firms under Xi Jinping. The main cause of concern was not so much that this support would make Chinese exports more competitive, but that the increased fire power of Chinese firms would allow them to easily swallow European firms, especially those struggling during the continent’s recurring economic crises.126 ‘When some countries heavily subsidize their own companies’, asked the French and German governments in a 2019 joint policy manifesto, ‘how can companies operating mainly in Europe compete fairly?’127 As a solution, the manifesto proposes ‘a European industrial policy fit for the 21st Century’, calling for European coordination in screening foreign investment and in funding high-tech sectors. It also asks the European Commission to aid the emergence of European champions by relaxing its tight anti-monopoly policy.128 The Franco-German position is remarkable not only for its unabashed adoption of economic nationalism, but also for its transposition of this sentiment to the European level. ‘The choice is simple when it comes to industrial policy’, the manifesto declares, ‘unite our forces or allow our industrial base and capacity to gradually disappear. A strong industry is at the heart of sustainable and inclusive growth. And above all, it’s what will give Europe its economic sovereignty and independence’.129

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Apart from Chinese competition, the other factor forcing the pace on European industrial policy was the 2020 coronavirus pandemic. As elsewhere in the world, the scramble for medical supplies encouraged authorities to indigenise global supply chains. This initially threatened to disrupt the European single market, because governments imposed export bans against other EU countries. However, a more coordinated European response did eventually emerge, no doubt driven by the realisation that most of the continent’s economies are unlikely to attain selfsufficiency in medical equipment soon.130 In addition, the EU forced the pace on fiscal integration. In order to support those countries most affected by the pandemic, the Union started to emit bonds backed by the joint budget of the Commission, rather than by the member states. This was hailed by future German Chancellor Olaf Scholz (1958–) as a ‘Hamiltonian moment’, in allusion to this key moment in the fiscal unification of the early American nation-state (Section 2.3). While the historical parallel with the eighteenth-century United States may be tenuous, the German acceptance of fiscal transfers to other member states is a potentially important signal in favour of integration.131 These developments raise the question whether the EU can potentially engage in an economically nationalist policy in its own right. Few would classify the contemporary Union as a nation, but it is conceivable that economic integration and the championing of European firms against foreign competition may create such a sentiment. Indeed, the Commission has often positioned itself as the guardian of a ‘European Economy’ (and the protector of its consumers against imports of chlorinated chicken from the United States or antibiotically treated shrimps from Asia). Whether this is the start of a European economic nation remains to be seen.132 European coordination still has not replaced industrial policies by the member states. The German government has forced the pace on its own measures to support domestic enterprises. Emmanuel Macron (1977–), the pro-European President of France has emphasised both ‘strategic autonomy for our Europe’, as well as ‘rebuilding French agricultural, health, industrial and technological independence’, all in the same speech.133 Eventually, tensions between national and European industrial policy objectives are likely to emerge. Indeed, the Franco-German manifesto referred to above can also be read as a request that the European Commission step back from its regulatory authority to allow these two powerful nation-states to compete effectively against China. To what degree European countries find it necessary to truly pool their resources may well depend on how severe they judge the challenge posed by Chinese industrial policy to be.

8.4 Chinese Techno-Nationalism and Digital Swadeshi Since the turn of the millennium, manufacturing has been transformed by the integration of information and communication technologies (ICT) into production processes. By some accounts, the integration of internet-based

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technologies into manufacturing and work has ushered in a Fourth Industrial Revolution. While the numbering of economic revolutions is tricky (more so if they occur while we are doing the counting) the profundity of the change is beyond doubt. In addition to changes in production technologies, it has never been easier for businesses to communicate and collaborate across the globe through messaging, video conferencing and cloud computing.134 How have economic nationalists reacted to this apparent flattening of the globe? One might intuitively suppose that economic nationalists should resent technologies that threaten to erase boundaries between nations. Some isolationist strands of nationalism have accordingly been marked by scepticism toward technological change. The hallmark of the Romantic thinkers of the early nineteenth century was the renunciation of technical progress in favour of a rustic past (Section 3.3). Gandhi saw machines, including railways, as destroyers of egalitarian village communities (Section 4.4). Yet these isolationists, who equate technology with a Western modernity they despise, have generally been in a minority. Most nationalists cherish a ‘modern’ image for their community and have therefore been enthusiastic supporters of technological progress. This attitude predominates today, in particular within the leadership of emerging great powers such as India and China. Sometimes called techno-nationalism, this view equates the domestic ownership of technology with national advancement. When it comes to economic ends, there are three reasons why nationalists have encouraged domestic innovation. Examining these reasons allows us to understand the dominant role of Chinese industrial policy under Hu Jintao (1942–) and Xi Jinping.135 First, nationalists have often believed that technology can foster economic collaboration within the nation. Domestic integration has of course been a core nationalist goal since Henry Clay and Friedrich List. Their old obsession with building roads and railways finds its echo in the efforts by contemporary Chinese nationalists to construct high-speed rail networks across the country. Additionally, these policies are seen as beneficial to domestic producers of railway equipment and are therefore connected to larger aims of industrial growth. In a similar vein, the Chinese leadership has enthusiastically embraced communication technologies as a sector of expansion for domestic manufacturers. Yet it has sought to balance the subsidisation of ICT with an increasingly tight control over the content that is being diffused through the new technologies.136 Second, nationalists have often presented scientific research as the key to mastering self-sufficiency. Japanese techno-nationalists of the interwar believed that technology enabled a resource scarce nation to substitute away from imported raw materials (Section 6.4). While most contemporary nationalists do not pursue autarky, many do seek to decrease their dependence on imports. The Chinese leadership has invested heavily in the development of

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renewable energies and electric vehicles, partially to diminish its reliance on imported fossil fuels.137 Third, technological progress is seen by many nationalists as fundamental to industrial upgrading and therefore economic development. This leads us to the classic tension of techno-nationalism, which is closely connected to the Nationalist Dilemma. It arises because developing countries rarely possess the capacity to produce all necessary scientific advances on their own. Throughout the postwar period, nationalists in the Global South have therefore needed to open up. China did exactly this under Deng Xiaoping, when it invited multinational companies in order to ease technology transfer (Section 7.3). By the year 2000, this strategy had yielded some handsome rewards. The combination of foreign technology and domestic cheap labour had created a manufacturing sector that was sharply competitive in world markets. At the same time, it had created what Chinese policymakers increasingly saw as new dependencies. The foreign technologies that were used by Chinese firms under license triggered heavy outflows of royalty payments. Those technologies that had been transferred to Chinese partners were becoming quickly outdated given the fast pace at which the research frontier shifted outward.138 The Chinese government under Hu Jintao, and most concertedly under Xi Jinping, therefore resolved to indigenise innovation. They did this in a number of ways, including investments into domestic research. Most importantly, they initiated a slew of industrial policies that enabled domestic firms in ‘high-tech’ sectors as diverse as robotics, artificial intelligence and construction equipment to absorb domestic innovations and compete against foreign enterprises. Moreover, the authorities attempted to give domestic firms a competitive edge by converting home-grown technical standards, such as those governing Chinese 5G mobile networks, into international standards. Finally, the government supported exports of these high-tech goods through programmes such as the Belt and Road Initiative (BRI). Chinese economic nationalism thus remained outward-focussed. However, its attempts to combine this export orientation with continuing support for national champions triggered strong resistance from its trading partners.139 In the next section, we will analyse the American reaction to Chinese industrial policies. At the end of this section, we will briefly consider a much overlooked, but nonetheless consequential, reaction to Chinese techno-nationalism: that of India’s Narendra Modi (1950–). *

The resurgence of industrial policy in high-tech sectors has not been confined to developing countries. However, policymakers in countries that were catching up could arguably present a stronger case for the necessity of subsidies and

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regulatory intervention. They could do this by drawing on a growing corpus of economic literature advocating targeted support of high-tech sectors. The basic argument advanced by these mostly heterodox economists was that highend manufacturing continued to be the path to durable economic growth. Often such arguments built on the historical experience of the East Asian states of the postwar period. (There is a large overlap between those academics studying postwar Japan and South Korea and those calling for industrial policies in today’s developing countries).140 These arguments were strengthened by the global financial crisis of 2008, which seemed to undermine the sustainability of economies built on liberalised financial services. This partially erased the stain of the 1997 Asian financial crisis, which had earlier been seen as the death knell of the Asian model of the developmental state. The 2008 crisis, on the other hand, seemed to suggest that liberal economies were hardly immune from deep recessions, especially if they had abandoned traditional manufacturing pursuits. This increased the allure of alternative models of globalisation, particularly those building on state-led industrial policy. These alternatives were then sometimes branded as a ‘China Model’ or a ‘Beijing Consensus’.141 At the same time, proponents of industrial policy worried that the multilateral institutions of economic governance as they had developed during the 1980s and 1990s would block the use of state-led development models by contemporary developing countries. Membership in the World Trade Organisation, for instance, barred countries from employing many of the traditional industrial policy measures once used by East Asian exporting states, including local content requirements. Stringent intellectual property rights (often reinforced through the WTO) also seemed to impose financial burdens on emerging economies that needed to cough up steep royalty payments.142 One of the most influential modern justifications of industrial policy can be found in the work of Ha-Joon Chang (1963–), a Korean economist teaching in Cambridge (UK). His best-known book, Kicking Away the Ladder (2002), has reached a global audience and is worth discussing briefly. At its core, the book is an attempt to apply Friedrich List’s argument to contemporary developing countries. Chang does this in several ways. On a methodological level, he explicitly follows List’s approach of investigating the policies that today’s rich countries employed in the past.143 This historical investigation had constituted the first third of List’s National System and it occupies an equally prominent place in Chang’s book. Like List, Chang concludes that today’s rich countries developed only because they relied on interventionist trade and industrial policies. In this interpretation of history, Chang subtly reorientates List’s argument away from its original focus on trade policy (Section 3.4). Instead of regurgitating the well-known infant industry argument, Chang zooms in on the historical role of industrial policies in spurring technological progress through subsidies and education policy.144 In particular, Chang

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explains, nineteenth-century Germany, the United States and Japan invested in domestic research and encouraged the appropriation of British technology. This often involved ‘illicit’ means of technology transfer, including reverse engineering, copying blueprints and smuggling advanced machines.145 In addition, Chang reiterates List’s charge that the liberal ideology underlying free trade and laissez faire works to the exclusive benefit of the rich world. Having availed themselves of the bounties unlocked by industrial policy in the past, Chang believes, rich countries have now devised global institutions that prohibited developing countries from utilising the same set of tools. In List’s words, the rich world was ‘kicking away the ladder’.146 Chang’s work – and others like it – provide a Neo-Listian justification for the exercise of industrial policy by developing countries. Because the global rules limiting the use of industrial policies were unfair, developing countries could not be blamed for breaking these rules. The increasing resort to industrial policy in Chinese high-tech sectors must be seen as part of this global resurgence. This does not mean that the CCP took their cue directly from NeoListian writings. Nonetheless, it is worth remembering that the rise of Chinese industrial policy was not only due to factors internal to China, but that it was part of a global trend as intellectuals and policymakers around the world reflected on the challenges developing countries faced in overcoming the middle-income ‘trap’.147 Within the China of the mid-2000s party grandees were also increasingly sceptical whether liberal policies would continue to support growth. The leadership of the 1990s under Jiang Zemin and Zhu Rongji had opened up China to increasing foreign investment and imports. Membership in the WTO was a key element of this strategy (Section 7.3). These reforms increased competition for domestic Chinese firms, who were starting to lose market share to foreign multinationals by the turn of the millennium. This development was noted with dismay by some conservative factions within the Party and the intelligentsia. Yet the autocratic structure of the Party and the hope that increased competition would eventually aid the emergence of tougher Chinese national champions kept a lid on dissent.148 The new leadership team headed by Hu Jintao, who took over the helm in 2003, was more receptive to interventionist ideas. In particular, the new leadership was concerned about three interlocking trends. First, it noted that China’s domestic capacity to generate marketable innovations was underdeveloped. A lack of domestic innovation translated into a continuing dependence on imported foreign technologies. Second, importing technologies had financial repercussions, because operating patented technologies under foreign license triggered a steep outflow of royalty payments. Finally, the CCP stressed that few Chinese firms had been successful in acquiring up-to-date technologies from their foreign partners. Instead, multinationals had only introduced older technologies for transfer into their joint ventures. These were suitable for the

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labour-intensive exports produced in China, but a continuing reliance on lowgrade products did not satisfy the developmental aspirations of Hu Jintao and the CCP. Taken together, these trends aroused fears that China’s growth, while extraordinarily rapid in quantitative terms, was not enough to raise the country above its current middle-income status. The Chinese economy would then remain stuck in low-grade manufacturing and dependence on foreign technologies. What was need was a qualitatively different kind of growth, Hu believed, one built on the ownership of domestic technologies and upgraded manufacturing capabilities.149 As a result, Chinese leaders of the past twenty years have, in some form or another, emphasised the need for indigenous innovation. Hu Jintao set the new course in 2006 by stressing, albeit in rather stilted form, that ‘enhancing indigenous innovation is the national strategy which guides the various aspects of modernization and inspires the innovative spirit of the entire nation’.150 His Premier Wen Jiabao (1942–) was more rhetorically versatile, and linked innovation to the Party’s project of national greatness: Indigenous innovation is the soul of science and technology development, the source for a nation’s development, and the backbone for the rise of the country. Without indigenous innovation, it will be hard for us to gain a fair standing on the international arena, hard to gain a nation’s dignity, and even hard to stand up among the world of various nations.151

Wen also delivered a blistering attack against the previous model of technology transfer through foreign investment when reminding his audience that ‘in fierce international competition, the truly core technologies cannot be acquired by exchanging them with the market, cannot be bought by money, and introducing technology and equipment does not mean introducing innovation capacity. We should mainly rely on ourselves for our development’.152 The Xi Jinping administration has carried forward the same emphasis on domestic technologies. Xi’s lengthy report at the nineteenth Party National Congress in 2017 was built around the CCP’s mission of ‘national rejuvenation’, which is ‘propelling China into a leading position in terms of economic and technological strength, defence capabilities, and composite national strength. . . . The Chinese nation, with an entirely new posture, now stands tall and firm in the East’. The same report focusses extensively on domestic innovation, setting the increase of China’s ‘economic and technological strength’ as a core goal of the government.153 It would be easy to dismiss the rather turgid prose of the CCP-leadership as just that, but their verbal techno-nationalism has been translated into policy blueprints, and subsequently into industrial policy on the ground. Hu and Wen’s rhetoric found reflection in their 2006 National Medium- and LongTerm Plan for the Development of Science and Technology, while Xi’s priorities were realised in his government’s Made in China 2025 plan (released in

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2015).154 The Made in China 2025 plan is crucial for a number of reasons. It presents an ambitious strategy to upgrade Chinese industry by leapfrogging from labour-intensive production to the technology frontier in ‘smart manufacturing’. This involves the incorporation of web-based technologies and artificial intelligence into industrial robotics, allowing an agile and efficient management of production. Apart from changing production technologies, Made in China 2025 also embodies a commitment to source the necessary technologies domestically and thus attain technological ‘self-sufficiency’. While the plan contains a good dose of blue-sky thinking, it is backed up by financial firepower, an industrial policy machinery and detailed implementation targets. In particular, its associated documents set a range of local content targets, specifying the amount of inputs to be sourced domestically.155 The protectionist spirit of the plan made it a major bone of contention between China and the Trump Administration. In fact, one of the opening salvoes of the US-China Trade War beginning in 2018 was the demand by the American government that China retract the industrial policies associated with Made in China 2025. This was flatly rejected by the Chinese side, although the senior leadership did dial down overt references to the local content requirements associated with the plan. Nonetheless, it would be wrong to see Xi’s Made in China 2025 as an abrupt break with preceding technology policy. Xi arguably reinforced Hu’s efforts at indigenising innovation and upgrading manufacturing, although he has brought his own personal note of unpredictability to policy.156 It is therefore worth looking at the broad continuity of Chinese industrial policy in high-tech sectors over the first two decades of the millennium. The first pillar of technology policy has been to increase funding for basic research at universities and research institutes, and to improve the links between universities and enterprises. The proliferation of Science and Technology Parks throughout China attests to this initiative. Although indigenous innovation is the goal, the leadership has acknowledged the importance of attracting and retaining international talent. In many cases, the science bureaucracy has shown a preference for collaborations with overseas Chinese researchers and has often sought to encourage the return of diaspora scientists (see Section 7.4).157 The second pillar has consisted of efforts to strengthen intellectual property rights, which the upper echelons of the leadership recognised as central to securing domestic innovation. This is, however, a difficult area for the CCP. The rule of law is hard to enforce in the absence of independent courts and many Chinese entrepreneurs have become cautious with introducing disruptive innovations in the face of Xi’s frequent policy shifts. Moreover, it is precisely the lax enforcement of intellectual property rights that has made it easy for some Chinese firms to acquire foreign technology. A fundamental reform is therefore not in the interests of all factions within the Chinese elite.

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In fact, Xi’s government has itself stepped up the mandatory transfer of technology from multinationals to Chinese partners or the government. For example, foreign ICT companies that are active in China have been forced to surrender their source code to the authorities.158 A third pillar of Chinese technology policy has been a proactive approach to international technical standards. This involves, as a primary step, the development of a common standard to which all Chinese products in a given technological segment should conform. As a further step, the government may then lobby international standard setting bodies to convert the Chinese standard into a global benchmark. The potential benefits of this strategy are large. A global adoption of Chinese standards would unlock royalty incomes for Chinese firms, while their knowledge of the standard would provide them with a competitive advantage against foreign firms. Efforts in this direction started in 2004, when the Chinese government pushed for the global adoption of WAPI, a Chinese standard for data encryption in wireless networks.159 Although this push was unsuccessful, technical standards did have protective effects for domestic industry. For example, the alleged incompatibility of the iPhone with Chinese standards allowed regulators to delay entry of this product into the Chinese market by two years. This provided additional time for domestic handset manufacturers to expand into the booming market for smartphones. The most high-profile attempt to leverage industry standards was launched by the Xi Jinping administration at the end of the 2010s when it hoped to internationalise Chinese standards for 5G networks. In doing so, it sought to make its mark on the next generation of mobile communication devices and provide a helping hand to its national champion Huawei.160 However, it was exactly this close connection between the government and Huawei that proved to be the major stumbling block for the company’s expansion abroad. Alleging unfair competition and a breach of data privacy laws, many countries restricted the use of Huawei’s 5G equipment and limited the company’s operations. The Huawei saga illustrates not only how technonationalists can push for international expansion, it also illustrates the backlashes such a strategy can generate.161 Techno-nationalism relies on international expansion in other ways too. As a fourth pillar of their technology strategy, Chinese leaders have integrated the Belt and Road Initiative into domestic industrial policy. The BRI includes many different policy packages, but most involve the provision of financial assistance to developing countries, often through Chinese state-owned banks. In return, developing country partners often commit to purchasing Chinese high-tech equipment. For example, projects under the so-called Digital Silkroad have provided a ready market for Huawei’s products abroad.162 A similar principle applies to analogue industries. For example, Chinese government bodies have heavily supported domestic producers of construction equipment through subsidies, loans and favourable procurement policies.

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This has enabled domestic firms to compete against foreign enterprises on Chinese building sites and slowly upgrade the sophistication of their products. However, overly generous support by the government and its banks have contributed to overcapacity and mounting corporate debt for many Chinese firms in the sector. Fortunately for the debt-ridden industry, the statesponsored infrastructure projects of the BRI have created an overseas market for the sector’s excess capacity. International expansion thus eases the collateral damage of national industrial policy. Moreover, generous credit policies allowed Chinese companies to purchase European producers of construction equipment after the 2008 global financial crisis. These foreign acquisitions have unlocked another source of technological know-how.163 As illustrated by the example of the construction equipment industry, the core of industrial policy has been the provision of capital and protection by the state. This final policy pillar has allowed the Chinese government to steer innovation towards its preferred goals. For example, the authorities have funnelled large sums towards technologies that improve domestic communication and transport links. This includes the development of phone handsets, smart TVs and high-speed rail equipment. In many cases, this has been flanked by an industrial policy protecting domestic high-tech manufacturers. These enterprises can profit from a mix of ‘Buy Chinese’ procurement policies, subsidies and tax exemptions, as well as the provision of cheap credit by public banks. In the railway equipment sector, these measures have traditionally been complemented by requirements for foreign companies to transfer their technology. Having reached technological maturity, domestic companies can then build on state support to expand internationally along the BRI.164 However, the involvement of the Chinese state has not been without cost for domestic companies. With their increasing financial stake, Chinese authorities have been ever stricter in enforcing their own requirements on emerging communication technologies, often to enhance the government’s capacity for control and surveillance. The unpredictability of policy was starkly revealed during 2021, when Xi’s government cracked down on a number of Chinese flagship tech companies, including Alibaba and Tencent. Though ostensibly motivated by antitrust concerns, the crackdown is more likely driven by Xi’s opinion that developers of consumer apps and online gadgets are no longer serving the national project of digitally upgrading manufacturing. The purpose of Made in China 2025 are fully automated factories as a tool to wealth and power, not frivolous online shopping sprees.165 A goal more commensurate with the national purpose of the CCP leadership is independence from foreign suppliers of fossil fuels. Chinese authorities therefore encouraged investment in alternative energy sources. However, the government has stressed that the need for renewable energy should not lead to a dependence on foreign technologies in the wind, solar and electric vehicle industries. This has precipitated huge investments in the domestic

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development of technologies related to renewable energy generation and sustainable mobility. In addition, the authorities also supported Chinese manufacturers of key equipment in the green economy, such as wind turbines and electric car batteries. This has partially been accomplished by employing the market power of state-owned enterprises and by a profligate use of government funds. Technical regulations have also compelled electric car manufacturers to use batteries that only a Chinese manufacturer can supply, enabling this producer to stay in the market despite its comparatively high production costs.166 These sectoral policies have been flanked by a supportive trade policy. As classic forms of infant industry protection are banned under WTO rules, China has replaced import protection of manufacturing with export tariffs on its raw materials. These effectively lower the domestic price of inputs into manufacturing, providing an advantage to Chinese producers of solar panels or batteries.167 Finally, in industries such as wind power, Chinese regulators have often instituted local content rules or subsidies in violation of WTO agreements. Yet regulators have rapidly removed these programmes once an international arbitration ruling has been issued against China. Similarly, authorities have withdrawn support programmes once China became the object of American diplomatic pressure. Nonetheless, this temporary protection has often provided crucial breathing space to Chinese producers, as international dispute settlement and diplomatic pressure take considerable time to materialise.168 When the Trump administration came to power in the United States in 2016, its patience with diplomatic channels was soon exhausted (Section 8.5). In light of the ensuing 2018 US-China trade war, American efforts to counter Chinese techno-nationalism are clearly of overriding importance. Yet Chinese industrial policy in high-tech sectors also backfired in India, one of Asia’s largest markets. As is often the case with economic nationalism, the reactive policies put in place by India’s prime minister Narendra Modi were the outcome of both structural and coincidental factors. For one, Modi capitalised on increasing dissatisfaction among Indian nationalists with Chinese economic expansion that had been building since the start of the 2010s. Second, Modi reacted to the sudden shocks brought about by the coronavirus pandemic and the 2020 border clashes in the Himalayas (both of which were associated with China, although not necessarily with its economic policies). Modi’s protectionism abrogated the movement towards trade liberalisation the Indian economy had undergone since the early 1990s. The Indian economy had of course been tightly protected since independence, in reflection of the prominent role the Swadeshi movement for Indian self-sufficiency played in the campaign against the British Empire (Section 4.4). This changed in 1991, when a balance of payments crisis necessitated swift liberalising reforms. The extent of this liberalisation is sometimes

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overstated. It did not lead to a large injection of foreign capital into the Indian economy or a transfer of business ownership to foreigners (largely because the government remained tightly connected to major Indian capitalists, protecting them from hostile takeovers). Some of the tariff cuts were also later counteracted, once business lobbyists had found their feet again.169 Nonetheless, the lowering of barriers to trade and investment as well as the abrogation of the bureaucratic business license system ushered in a transformation of the Indian economy. Relishing the surging rates of economic growth, both the Congress Party and the nationalist Bharatiya Janata Party (BJP) generally supported these reforms. Dissenting voices from the ultra-nationalist Hindu fringe were largely ineffectual. Some of these fringe organisations, such as the Swadeshi Jagran Manch (SJM) would decry foreign investments and call for a return to Swadeshi, but to no avail.170 However, the rise of China slowly changed attitudes. China became India’s largest trade partner, accounting for a large share of India’s external trade deficit. To many observers, this trade deficit illustrated not only the ability of China to outperform India, but also illustrated the dubious methods the Chinese government had allegedly used to attain this competitive edge. Moreover, investments by Chinese state-backed firms in the Indian financial sector raised fears of dependence. The spread of Chinese tech-companies also seemed to undermine Indian dominance in ICT, one of the relatively few global export-oriented industries on the subcontinent. The BJP government of Narendra Modi, prime minister since 2014, reacted by launching its own techno-nationalist initiatives, in particular Make in India and Digital India. Like their Chinese counterparts, they sought to encourage upgrading in the manufacturing and ICT sectors. Yet the resources for subsidising research and development that were at the disposal of the Indian government were decidedly smaller than those available to the Chinese, so that Modi found it necessary to complement his industrial policy with stiff increases in trade barriers.171 Modi escalated these trade barriers in response to two crises hitting India in spring 2020. First, the coronavirus pandemic underscored the dependence on Chinese supply chains that many on the Indian right had warned about. One particular worry was the importance of Chinese raw materials for the Indian pharmaceutical industry. Not only is the pharmaceutical industry a key pillar of the Indian economy, but many Indians expected this industry to play a large role in the country’s response to Covid. Resistance to a Chinese ‘monopoly’ on pharmaceutical raw materials is also one of the key policy platforms of economic nationalists, such as the Swadeshi Jagran Manch.172 As in many countries, Covid therefore gave impetus to calls for ‘decoupling’ from China. The second shock was armed clashes in the Himalayan Ladakh region between Chinese and Indian border forces, which started on May 5th. Mounting Indian casualties, which fit into the perceived picture of broader Chinese aggression,

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triggered a nationalist outcry from the Indian public. As popular calls for the boycott of Chinese products gained traction, great power rivalry quickly spilled over into economic policy. One week after the start of the clashes, Modi announced his new policy of Aatmanirbhar Bharat (‘self-reliant India’). The BJP government emphasises that self-reliance does not imply autarky and indeed a large part of the measures associated with Aatmanirbhar Bharat are general measures of income support for those affected by the coronavirus recession, rather than an attempt at isolation. Nonetheless, Modi’s cabinet did at the same time introduce a swathe of far-reaching protectionist measures. Building on the earlier Make in India campaign, many of these measures involve tariffs or quotas against Chinese imports, the exclusion of Chinese firms from government tenders, or restrictions on Chinese equity holdings in Indian companies.173 Modi’s most symbolic strike against Chinese techno-nationalism involved the ban of dozens of popular Chinese-made mobile apps from distribution in India. While ostensibly justified on grounds of national security and data protection, the app-ban has the strong overtones of a support package for the domestic ICT industry. It was certainly received in this spirit by India’s tech-entrepreneurs, who marked the policy as heralding a new age of ‘Digital Swadeshi’. Banning Chinese apps will get ‘us closer to a new Aatmanirbhar India [and] create a whole new revolution for our swadeshi apps’, one start-up founder celebrated. Companies in the tech sector swiftly started to showcase their products as ‘a 100 percent India grown app, and made for passionate Indians’. Patriotic developers also quickly designed an app that removes Chinese-made applications from mobile devices. This ‘Digital Swadeshi’ quickly spilled over into the analogue economy. For instance, entrepreneurs developed an app called ‘Made in India’, which allows consumers to scan physical products in order to distinguish Indian from Chinese goods (and presumably boycott the latter).174 While the economic fallout of digital protectionism may be limited at first, this episode holds two important lessons. First, the time-honoured economic nationalist tools of boycotts and national branding can survive, and be strengthened, by the tools of the digital age. Second, like older forms of economic nationalism, modern technonationalism can breed its own reactions.

8.5 America First The isolationist policies of Donald J. Trump as President of the United States were an immediate reaction to Chinese techno-nationalism. But they were also the product of two trends that had been shaping American political economy for four decades. When we ignore these long-run trends and focus exclusively on the ‘challenge’ posed by China, we risk seeing Trump’s ‘America first’ agenda as a bolt from the blue. This was never the case.

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The first trend is the decline of US manufacturing employment, which commenced in the 1980s. Since that time, the perceived weakness of American manufacturing has provided fertile ground for protectionist appeals from the right and the left. Sometimes these appeals found expression in official trade policy, as under President Ronald Reagan (1911–2004). More often they were the language of the opposition: consumers in the early 1990s organising boycotts of Japanese cars, trade unions opposing NAFTA, or politicians on the campaign trail blasting corporate bosses who had moved production to low wage countries. For some protectionists, such as the former presidential hopeful Patrick Buchanan (1938–), these calls were simply the continuation of a proud American tradition of economic nationalism stretching back to the Founding Fathers (Chapter 2). During his presidential campaign, Trump would essentially reactivate the arguments – sometimes to the letter – of earlier protectionists such as Buchanan.175 Where they had warned of Japan in the 1980s, Trump chastised China in the 2010s. Chinese industrial policies are therefore important in explaining the flaring up of economic nationalism in the late 2010s, but they are an accelerant, rather than the source of the fire. The second long-term trend supporting the rise of isolationist doctrines was American ethno-cultural nationalism. Trump superimposed his protectionist discourse on salient cultural and racial divides within American society. This was possible because those voters who were negatively affected by globalisation, such as manufacturing workers, were often elderly white men who were also receptive to fears of cultural marginalisation in an America that was becoming increasingly culturally and ethnically diverse. Moreover, Trump exploited immigration as a topic that drew on both economic fears (migrants displacing native workers) as well as cultural preoccupations (migrants diluting ‘traditional’ American society).176 In doing so, Trump’s and his advisors such as Steve Bannon (1953–) followed the playbook laid out by the European populist right (Section 8.3). The marriage of economic and ethno-cultural grievances mattered, because this granted protectionist demands an audience they might otherwise not have reached. Culture wars were a strong congealing agent on the right, binding together religious voters, grassroots Tea Party members and smallgovernment conservatives. These groups were not necessarily losers of globalisation in a material sense, but they nevertheless ended up supporting a staunchly economic nationalist programme. This coalition catapulted Trump to the presidency in the 2016 elections and provided him with the opportunity to isolate the American economy. Once in power, this coalition also influenced what kind of tools were available to the new administration. The weight of small-government conservatives meant that industrial policy, with the exception of the defence sector, was out of the question. Preference was therefore given to tariffs. This distinguishes American right-wing

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nationalism from its left-wing variants. Democratic stars such as Elizabeth Warren (1949–) also accepted the need to protect American manufacturing, but favoured state intervention through subsidies and procurement policies. This stance influenced the policy outlook of Trump’s Democratic successor, Joseph R. Biden (1942–), whose administration has continued efforts to decouple the United States from China.177 *

In the early postwar decades, Americans generally viewed globalisation as proceeding in line with their own interests. This was a reflection of the strong position of American manufacturing firms in world markets. Reversely, the relative openness of American markets to allied countries partly reflected the geostrategic imperative of the Cold War.178 This consensus started to crack in the early 1980s. Decades of rapid economic growth had transformed the countries of capitalist East Asia from aid-dependent laggards into exporting powerhouses. The rise of Japan, which started to be seen not only as an economic competitor but also as a geostrategic rival, was especially worrying (Section 6.4). As Japanese products displaced American products and workers, protectionist pressures started to build, especially as American firms did not enjoy unimpeded access to Japanese markets. Much of the opposition came, unsurprisingly, from industries directly affected by Japanese import competition, such as steel, cars and motorcycles. The administration of Ronald Reagan between 1981 and 1989 agreed to protect some of these industries, partially through tariffs and partially by asking the Japanese government to limit exports. However, Reagan was unwilling to embrace a comprehensive protectionist policy that would go beyond responding to special interests. He also did not seek to revitalise American manufacturing more generally by instituting an industrial policy. Philosophically, Reagan was a smallgovernment conservative, who balked at the idea of suffocating intrusion into business life. While he was willing to make exceptions for some iconic American industries, Reagan also generally believed that free trade would benefit prosperity in the long run.179 However, others wanted to go further. For many commentators on both the right and the left, American economic woes were not limited to a few isolated industries. They pointed to the trade balance, which moved into deficit during the Reagan presidency, as signifying a general lack of ‘competitiveness’ of the American economy. The Democratic opposition sought salvation in a revival of industrial policy, although this did not prove popular with voters fearing ‘Big Government’. Nonetheless, the idea that the government should actively promote the competitiveness of the United States though investment in infrastructure and research remained influential in trade policy circles well into the

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1990s. The competitiveness discourse was nationalistic in the sense that its advocates did not believe that competition was taking place between individual companies, as neoclassical economists would have it. Instead, quoting Friedrich List, they believed that nations as a whole were competing on the world stage. Neoclassical economists such as Paul Krugman (1953–) were quick to dismiss List as a ‘turgid, confused writer’, but the shift of the debate from the individual to the national level had important implications. For one, it kept the possibility open that the government could intercede as the champion of the national economy. Moreover, if the United States were a single entity, then its competitors, most importantly Japan, were acting in a single mind too.180 The prevalence of industrial policy in Japan supported the tendency to view Japanese firms, workers and government as part of a wellcoordinated and menacing whole. Blaming American economic woes on its Asian competitor – known as ‘Japan Bashing’ – thus became a favourite pastime among political pundits and media personalities. As the Cold War wound down in the late 1980s, criticism of America’s allies became more pronounced.181 ‘Japan Bashing’ was not limited to the airwaves or to the many policy think tanks encircling Capitol Hill. Grassroots ‘Buy American’ movements proliferated from the late 1980s onwards, reaching their zenith in the early 1990s. These movements exhorted consumers to boycott Japanese goods and divert their purchases to domestic wares. They were animated by a strong antiJapanese animus and the feeling that the US government, in particular under the free-trading George H. W. Bush from 1989 to 1993, did not ‘stand up’ to Japan. Just like the ‘Buy American’ movements of the colonial and postcolonial eras (Sections 2.2, 2.4), the movements of the 1990s gained popularity because they gave ordinary consumers the feeling they could influence broader economic processes. As boycotts did not rely on intervention from Washington, they fit well into the mindset of small-government advocates. As one activist noted: ‘We don’t need tariff laws to get all these lost jobs back for our people. All we need to do is to simply stop buying foreign made goods.’ As so often, market realities did not quite live up to these aspirations. US-made products were often more expensive or of inferior quality than Asian imports and ‘Buy American’ could do little to change that. Nonetheless, these movements raised the temperature of American economic policy debates.182 One celebrity to join the increasingly frenzied chorus was Donald Trump, a New York real estate mogul with political ambitions and an insatiable taste for media attention. Trump himself had benefited handsomely from Japanese capital in his Manhattan ventures, with much of his business attributed to financial lifelines thrown by Asian investors. Yet he held very different opinions on Japanese trade. ‘We let Japan come in and dump everything right into our markets and everything – it’s not free trade’, Trump indignantly claimed on television in 1988, adding that ‘if you ever go to Japan right now, and try

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and sell something, forget about it’. Much of Trump’s ‘Japan Bashing’ was clearly opportunistic. With his uncanny instinct to bandwagon on a topic that aroused public anxiety, he distilled complex economic phenomena into poignant soundbites. In doing so, he invariably offered a caricature rather than an analysis of the world economy, as the reasons for fading American manufacturing prowess clearly went beyond Japanese nefariousness. The appreciating dollar of the early 1980s, which made American producers uncompetitive, shouldered a large part of the blame. So did the general trend of the US economy to specialise in services (including, one may add, Trump’s own franchises) as US incomes increased. Yet by zooming in on Japan and the machinations of its government, Trump superimposed a recognisable adversary on these abstract processes. He would act on the same script thirty years later, with China playing the part of the villain. Trump’s ‘Japan Bashing’ prefigures his later stance on China in other ways too. In both cases he would claim that the external enemy was supported by treacherous American elites, who in their spinelessness had struck unfavourable trade deals. ‘There’s no aggressiveness, there’s no advocacy, and that’s really the word. Everything’s a compromise today. We don’t want to anger Japan’, complained Trump in the 1980s, concluding indignantly that ‘[t]hey’re laughing at us!’ This called for a strong leader with the right business instincts, who would face up to Japan (China) and force them to open their markets. While this worldview was as much an oversimplification in the 1980s as it would be in the 2010s, it is a worldview that is remarkable for its consistency. There is good reason to believe that the core tenets of Trump’s economic nationalism, namely the focus on a recognisable enemy, anti-elitism and the exaltation of business-like leadership, have been in place since his musings on Japan thirty years ago.183 The forays of Donald Trump into economic nationalism of the 1980s remained nonetheless perfunctory and his scattered remarks on Japan did not constitute a fully-fledged campaign platform. Such a manifesto was provided by Patrick Buchanan, a one-time Reagan aide who moved to the far right of the Republican Party during the 1990s and eventually ran as a presidential candidate for the fringe Reform Party in 2000. Buchanan’s ideas matter not only because they provide a glimpse into American economic nationalism before Trump’s presidency, but also because his writings provided a detailed blueprint for Trump’s later positions.184 The essence of Buchanan’s ideology is well captured in the title of his main work The Great Betrayal: How American Sovereignty and Social Justice are Being Sacrificed to the Gods of the Global Economy (1998). Like Trump, Buchanan believed that domestic elites had betrayed America to its foreign competitors, arguing that ‘our elite force-marched the nation into the Global Economy of its dreams’.185 Unlike Trump, Buchanan did not put this betrayal down to the intrinsic spinelessness of Washington insiders.

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He argued instead that the economic interests of elites increasingly diverged from those of ‘middle America’. This disharmony of interests was due to globalisation, which dissolved bonds of loyalty and eroded ‘national unity’. In making this argument, Buchanan drew on traditional American nationalist thinking, in particular Henry Carey (Section 2.6).186 The difference with Carey’s time was that interests were not divided along geographical lines, as they had been in the nineteenth century, but between manufacturing workers and the managerial elite. Corporate leaders were no longer dependent on USmarkets, but made immense profits from their investments abroad (‘money has no flag’).187 These soulless transnational corporations then used their thirty pieces of silver to ensure the passage of even more free-trade deals in Congress.188 Similarly, well-educated professionals were able to sell their services all over the world and prosper.189 Aloof college professors, for their part, are not hurt by the flood of Japanese imports and could shill for free trade: ‘we listened to cloistered academics peddling pet theories’.190 For Buchanan, the prosperity of elites contrasted with the destitution of traditional ‘middle America’, which was being hollowed out by fierce foreign competition. Instead of the thriving factory towns that had marked the America of old, the country was now blighted with the ‘blackened ruins of a dead civilization as the industrial disarmament of the United States proceeds apace’.191 Buchanan then contrasts this hellscape to the glory days of American protectionism, when Alexander Hamilton, Henry Clay and Abraham Lincoln were ‘the economic nationalists who built America [and] did not permit alien ideologies to prevent them from doing what was best for the nation’.192 Like Trump would later do, Buchanan thus harked back to a bygone age of economic pre-eminence. This was reflected in Buchanan’s campaign slogan ‘Make America First Again’, a direct antecedent of Trump’s mottos.193 Most importantly, Buchanan foreshadows Trump’s populism by recasting American political economy as a struggle between global elites and the local nation. Buchanan made even more contributions to the nationalist cause that would resonate twenty years later. He advocated tariff protection, unlike other writers at the time.194 Buchanan also broadened the debate beyond Japan by directing much of his anger at Mexico. In Buchanan’s world, the economic relationship with Mexico was almost as deleterious as the one with Japan. After NAFTA had come into effect in 1994, Buchanan complained, companies could easily move their production south of the border to take advantage of lower wages there. American workers were therefore forced ‘into a Darwinian competition’ with Mexican workers who ‘have to work for 50 cents an hour’.195 To make matters worse, Washington elites had thrown the borders open to immigration, so that Mexico ‘exports its jobless to us’.196 The double ‘threat’ from Mexico, first as a destination of offshoring through NAFTA and second as a source of migrants, would play an important role in Trump’s campaign.

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Some of Buchanan’s concerns over NAFTA and offshoring were echoed by the American left. In fact, for most of the 1990s the most formidable opposition to NAFTA and other free trade agreements came from labour unions and the Democratic Party. When the Democratic President Bill Clinton (1946–) pushed the NAFTA bill through Congress in 1993, he had to rely on Republican votes as his own party would not follow. The reasons are not difficult to fathom. Offshoring was most likely to hit domestic manufacturing workers, and labour representatives were closely tied to the Democrats. Moreover, fears that NAFTA would precipitate a race to the bottom in social and environmental standards galvanised grassroots groups that were a traditional Democratic constituency.197 Throughout the 1990s and 2000s, this left-wing opposition did sometimes utilise national frames to articulate their concerns about globalisation, especially when it came to offshoring. For example, when an advisor to Republican President George W. Bush (1946–) lectured Congress on the economic efficiency of offshoring to India in 2004, Bush’s Democratic challenger John Kerry (1943–) blasted the administration for selling out American workers. Kerry also derogated American executives relocating business operations abroad as ‘Benedict Arnold bosses’, in reference to the turncoat general of the American War of Independence who had betrayed the young nation to British imperialists.198 Like Evo Morales in Bolivia, the American left at the time was not afraid to appeal to patriotic sentiment to frame their economic programmes (Section 8.2). The most durable manifesto that combined progressive economics with nationalism was formulated by Robert Reich (1946–), who had served as Bill Clinton’s Secretary of Labour between 1993 and 1997. In a book (The Work of Nations) published on his exit from government, Reich advocated a ‘positive economic nationalism’. This centred largely around an industrial policy comprising investment in research and infrastructure. The resulting leap in innovation would help American workers become more productive. Reich stressed that competition based on innovation would be a positive-sum game, rather than the Darwinian struggle envisaged by right-wing nationalists, because all countries would profit from technological advances.199 Nonetheless, there were important overlaps between Reich’s programme and that of Buchanan. Reich agreed that the old ‘national economy’ as it had been built by Hamilton, Clay and Lincoln was becoming meaningless as borders were being eroded. He also believed that this severed the ties binding Americans together.200 Like Buchanan, Reich alleged that corporations investing globally were becoming disconnected from the nation and its citizens.201 Although he did not engage in the same elite-bashing as his right-wing counterpart, Reich did also believe that the rewards from global markets were confined to a small group of mobile professionals with marketable skills. The majority of Americans engaged in routine manufacturing or administrative pursuits were in danger of having their jobs offshored to low-wage countries such as Mexico. Reich foresaw that

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this economic split between winners and losers from globalisation would translate into a gaping political divide, as Americans would find it ever harder to agree on national projects.202 Reich’s analysis prefigures that of left-wing globalisation critics of the 2010s, in particular Elizabeth Warren. The partial convergence between right and left-wing critiques of globalisation from the 1990s onward shows that there was a potential path for a right-wing politician to lure former Democratic voters who felt left behind by rapid economic integration.203 Buchanan recognised this as a strategy early on and so eventually would Trump.204 If the ideological positions of the 1990s echo those of the 2010s so closely, this raises the question of why it took so long for economic nationalism to make an impact. While Buchanan gained a lot of traction in the media to spread his ideas, his results at the polls were disappointing, placing him in fourth place in the 2000 presidential race. Why did leaders and voters not follow the banner of protection much sooner? To some degree, other priorities were weightier. After the period of relative calm in the 1990s, geopolitical imperatives came to the fore once again, and these led American leaders to conclude new free trade agreements. George W. Bush instituted a raft of bilateral trade treaties with predominantly Muslim countries after the terrorist attacks of 11 September 2001. His successor Barack Obama (1961–), despite his initial hesitancy towards globalisation, crafted the ambitious Trans-Pacific Partnership (TPP) with Asian countries to counterbalance China’s weight in the region. And one of the drivers behind Bill Clinton’s push for NAFTA had been his belief that trade would spread American political values and ‘the prospects of people around the world for democracy, freedom, and peace’.205 Trump, on the other hand, would renounce America’s role on the world stage and this political isolation evened the way for economic isolation. In addition, the labour market shock which materialised after China’s entry into the WTO in 2001 (Section 7.3) was probably larger than the effect of NAFTA and Japanese competition from earlier decades. This surge in Chinese imports was directly associated with a large-scale loss of manufacturing jobs in the United States and a turn of the electorate towards Trump. The great number of displaced workers in the decade before the 2016 presidential election eased Trump’s success at the polls.206 Given China’s size and its geopolitical weight, anti-Chinese agitation also became more extreme than ‘Japan Bashing’ had been. For example, the writings of China hawks such as Peter Navarro (later economic advisor to President Trump) are to an almost farcical degree obsessed with attributing every imaginable evil haunting the United States to Chinese economic policy. Navarro’s bestselling book Death by China (2011) provides a litany of complaints against the ‘Dragon’, ranging from the partially accurate (industrial policy has provided Chinese firms with a competitive advantage) to the

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outlandish (Chinese products kill American consumers in large numbers).207 Navarro’s work provides a valuable insight into the minds of China hawks and their readership, demonstrating the level of anxiety China’s rise triggered. Nonetheless, Navarro was a marginal figure in policy circles before Trump brought him to the White House, and it is unlikely that he would have had much impact without this patronage.208 The bedrock of political support for economic nationalism was supplied by an allied ideology, which can be termed ethno-cultural nationalism. Adherents of these ideas believed that ‘traditional’ American identity and religious values were under threat from liberals and progressives, who had introduced social innovations such as LGBTQ rights, abortion and multiculturalism. The backlash against these innovations encompassed a disparate array of right-wing groups, including evangelicals, small-government conservatives and traditionalists. Whilst this movement had arguably been building since the Clinton years, it rapidly gained in popularity as a grassroots opposition to the Democratic administration of Barrack Obama between 2009 and 2017. As the first Black president of the United States and as one of its most confidently cosmopolitan politicians, Obama triggered both cultural anxiety and racial animosity among many white right-wing Americans. In addition, Obama promoted an extension of public services, in particular health care, which aroused deep-seated fears of government control. The most obvious manifestation of this growing opposition to Obama’s presidency was the Tea Party, which has since 2009 championed small government conservatism and a return to the ‘original’ (that is, culturally homogenous) Republic of the Founding Fathers.209 Concerns about American culture often meshed with, and sometimes provided cover for, white racial anxieties. For instance, the Tea Party also attracted figures from the right-wing fringe who saw the group as a springboard for white identity politics. Among these was Steve Bannon, a former naval officer, former investment banker, and former Hollywood producer, who longed to try his luck as a political operative. Bannon had for many years been steeped in apocalyptic theories that prophesied the impending collapse of Western civilisation due to a combined onslaught of liberalism, cosmopolitanism, and Islam. These theories became the ideological basis for Bannon’s online media empire, centred around his news website Breitbart. Bannon would later become Trump’s chief strategist, and after winning the White House, it was he was who would define the administration’s agenda as ‘economic nationalism’. In truth, Bannon’s nationalism was largely based on ethno-cultural issues. He showed little interest in economic questions before he joined the Trump campaign (although he would later claim his opposition to globalisation was a product of the global financial crisis of 2008). This neglect of economic questions contrasts with Trump, whose utterances against economic integration, as we have seen, go back many decades. Reversely, Trump was not known as a committed culture warrior before he started to

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aim for top office in 2010, being sometimes even viewed as progressive on racial and social questions before that date.210 The thinness of Bannon’s economic ideas explains the tendency by most commentators (as mentioned in the introduction) to treat the economic nationalism of the Trump administration with derision. Yet focussing on Bannon ignores that these ideas were important to Trump himself. Contrary to the popular belief that Trump was nothing but a willing vessel for Bannon’s ideas, the relationship between Bannon and Trump is more appropriately viewed as a marriage between the ethno-cultural and economic strands of American nationalism. During the 2016 presidential campaign, this marriage worked because both sides realised its political potential. It unlocked voting groups that would have been unattainable had these movements campaigned on their own. For economic nationalists, appeals to cultural fears accessed materially comfortable white milieus that were not necessarily left behind by economic globalisation. Hence Trump started spreading the racially tinged myth that President Obama had been born in Kenya, rather than in the United States. He also made an issue out of the ‘criminality’ of migrants once he had decided to campaign for president.211 Ethno-cultural nationalists, for their part, could use appeals to economic anxieties in order to access traditionally left-leaning constituencies in the manufacturing belt. The calculated nature of this gambit is obvious in Bannon’s declaration that ‘with economic nationalism we can crush the Democrats’. Running on an economic platform also allowed Bannon to claim that he was a fighter for the prosperity of all Americans rather than a champion of racial sectarianism. ‘I’m an economic nationalist’, Bannon declared in 2016, adding disingenuously that ‘I’ve never been a supporter of ethno-nationalism’.212 Naturally, ideologies are not universally compatible. Ethno-cultural and economic nationalists overlapped on a significant number of issues and this helped to make the alliance palatable to either side. This overlap is readily visible in Trump’s speeches during the presidential campaign. In a posture reminiscent of a peronist caudillo, he used these speeches for ‘Declaring American Economic Independence’ and railing against the free trade policies of his Democratic opponent Hilary Clinton (1947–). Even though this rhetoric focused on the economy, there are important overlaps with ethno-cultural grievances.213 In most of Trump’s speeches, a central point is the defence of American ‘sovereignty’ against international agreements, which are the ‘global power structure that [is] responsible for the economic decisions that have robbed our working class, stripped our country of its wealth, and put that money into the pockets of a handful of large corporations and political entities’.214 Hilary Clinton was particularly vulnerable to charges that she had undermined American sovereignty, because her husband Bill Clinton had implemented NAFTA and initiated China’s accession to the WTO during his presidency.

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Hilary Clinton herself had also defended the Trans-Pacific Partnership during her time as Secretary of State in the Obama administration.215 Trump mixed these facts with conspiracy theories according to which his opponent was part of a global financial cabal: ‘Hillary Clinton meets in secret with international banks to plot the destruction of US sovereignty in order to enrich these global financial powers, her special interest friends, and her donors’.216 Much of this tied in with the concerns of cultural nationalists, who have called for the defence of American sovereignty against ‘libertarians and a globe-trotting business elite’ who had become untethered to ‘true’ American values.217 As visible from those statements, both sides were also joined together by a strong anti-elitist sentiment, according to which Washington insiders had sold out the country to foreign interests. ‘Our politicians have aggressively pursued a policy of globalization’, Trump claimed, ‘moving our jobs, our wealth and our factories to Mexico and overseas’, adding that ‘globalization has made the financial elite who donate to politicians very wealthy. But it has left millions of our workers with nothing but poverty and heartache’.218 These attacks against global elites echoed not only Buchanan’s writings of the 1990s, but also the spirit of grassroots groupings such as the Tea Party. Yet Trump’s campaign pummelled America’s elites not only because they stood for international finance and trade agreements, but also because they were associated with the cosmopolitan values that angered cultural nationalists.219 For example, Trump frequently launched diatribes against ‘a leadership class that worships globalism over Americanism’ – a juxtaposition that could be understood in both cultural and economic terms.220 Similarly, Bannon framed the campaign as an epic battle between ‘globalists’ and ‘patriots’, terms that could appeal to both camps.221 These soundbites were strengthened by appeals to the authority of the Founding Fathers. For economic nationalists, Alexander Hamilton represented the glorious birth of the American economy (an idea that Buchanan had also stressed extensively). For cultural nationalists, the exaltation of historical patriots added the patina of respectability that they craved to Trump’s tirades.222 Trump therefore made sure to weave references to the protectionism of his claimed ancestors (Washington, Hamilton, Lincoln) into his campaign speeches.223 Opposition to migration was an even more crucial issue that sealed the pact between different groups on the American right. Trump presented immigration as a threat to American labour markets, arguing that low-skilled newcomers would drive down wage rates and raise unemployment among natives. This point was therefore part of his wider argument that international integration was harming American workers, especially those at the lower end of the wage scale.224 In addition, immigration from regions perceived to be culturally distinct was presented as a threat to America’s social fabric and security. ‘When Mexico sends its people, they’re not sending their best’, Trump raged

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in one of his most infamous speeches, ‘They’re bringing drugs. They’re bringing crime. They’re rapists’.225 Trump added that immigrants would come not only from Latin America, but ‘probably – from the Middle East’ ominously adding that ‘Islamic terrorism is eating up large portions of the Middle East’. Such racially charged diatribes galvanised the followers of Steve Bannon, appealing to their morbid fantasies about a West overrun by the barbarian hordes beyond the border. The wall that Trump promised to build on the US southern border was a potent symbol of this desire for both cultural and economic isolation. This tactic was of course familiar from European rightwing populists (with whom Bannon was in close contact), who similarly fused both sets of concerns in their migration discourse.226 A final – and quite surprising – overlap between economic nationalists and other groups on the right was tax policy. This was important because many groups propounding cultural nationalism also had an economic programme. The Tea Party was made up of fiscal conservatives championing lower taxes and opposing Obama-era federal spending. There were also small-government and pro-business holdouts from the Reagan era. These groups were fervent believers in the unregulated markets and the minimal government which they believed had characterised the ‘true’ America at its founding. It may appear that this position would be difficult to reconcile with that of economic nationalists, who are often sanguine about government intervention and who tend to see taxes as a sacrifice for the national good. However, American economic nationalists managed to square this circle by stressing that domestic taxes were high because the US government had been subsiding international organisations, foreign allies and developing countries through aid. If the government were to keep tax dollars at home, as isolationists would have it, domestic burdens could be reduced. This argument was of course familiar from the talking points marshalled by UKIP during the Brexit referendum, when it attacked Brussels for siphoning money from British workers (Section 8.3). Trump extended this argument even further, again building on Buchanan, and proposed that domestic taxes and tariffs were substitutes. One could either charge fellow nationals through income taxes or charge foreigners through tariffs. Protectionism would therefore lead to lower taxes. Trump appealed once again to the Founding Fathers: ‘Our original Constitution did not even have an income tax. Instead, it had tariffs – emphasizing taxation of foreign, not domestic, production’.227 Trump conveniently omitted to mention that tariffs are in part paid by domestic consumers, but it was nonetheless an argument that could appease both originalist believers in the constitution, Tea Party fiscal conservatives and isolationists. Low taxes also handily appealed to the self-interest of Trump and his close associates as business owners. An unwavering commitment to tax cuts therefore became the most fertile common ground between Trump and free-market advocates. Among these were veteran anti-tax crusaders such as the economist Arthur Laffer

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(1940–), who had held canonical status with Republicans since the Reagan years.228 There were nonetheless important tensions between the different camps supporting Trump and these affected the formulation of policy once he had secured the presidency. Infighting within the administration was common (and was much publicised in the press and popular literature).229 The chaos inside the Trump White House, however, should not distract from the fact that Trump did eventually carry out many isolationist policies, in particular when it came to migration, tariffs and the decoupling of supply chains. Migration policy was crucial. Trump had campaigned heavily on restricting immigration and Steve Bannon saw this as something that needed to be acted on promptly. Trump did indeed quickly restrict the entry of foreigners by issuing a number of executive orders. These included a ban on immigration from predominantly Muslim countries. He further temporarily suspended the entry of refugees into the United States, pending a fundamental tightening of admissions. Finally, Trump restricted the issuance of visas to citizens of selected countries, including China, and mobilised funds for his (largely symbolic) wall on the US-Mexican border.230 These policies were heavily contested – not just from left-wing migrant rights groups and the courts, but also from business lobby groups. The latter carried weight because they were an important constituency for Trump. As employers of migrant workers, businesses had a strong interest in continued access to a reliable stream of labour at competitive wage rates. This was especially the case in labourintensive agriculture, where employers complained about a shortage of workers.231 Their cause was supported by free-market thinkers, such as Arthur Laffer. While these economists agreed with Trump on the importance of being ‘tough’ on illegal immigration and crime (thus betraying a certain cultural nationalism), they were not isolationists. Instead, they believed that immigration, especially by high-skilled workers, would spur economic growth. An entry system privileging well-educated workers, Laffer argued, would give the ‘United States an advantage over China, Germany, Canada and other nations that want to challenge American economic and industrial superiority’.232 In other words, managed immigration could also be defended on national grounds. This expansionist idea struck a chord with some senior officials in the Trump administration, who publicly declared that the country was ‘desperate, desperate for more people . . . we are running out of people to fuel economic growth’.233 Nonetheless Trump stuck with his isolationist instincts. He was able to do this because reworking the US immigration system did not require extensive legislative procedures that might have provided business interests with a greater window to exert their influence. Instead, Trump used executive orders. He also directed local immigration authorities to utilise the significant amount of discretion at their disposal to rack up deportations, limit admissions

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and deny humanitarian exceptions.234 Moreover, Trump used the emergency of the coronavirus pandemic to clamp down on immigration. Under the pretext of safeguarding public health and protecting local labour markets affected by lockdowns, Trump once more suspended the entry of refugees, restricted admission based on work visas and blocked the issuance of green cards. ‘We must first take care of the American worker’, explained the president, pointing to the economic toll of the pandemic. Given that Trump downplayed the impact of the virus on almost every other occasion, the pandemic was clearly just a welcome opportunity for implementing his longstanding anti-immigration agenda.235 Tariffs were the other major area where Trump overrode the concerns of free-market economists and business advocates. Some of the president’s Reaganite economic advisors, such as Laffer, agreed that the threat of tariffs could be used to open up Chinese markets and compel China to suspend its controversial Made in China 2025 programme of industrial policies. Yet the Reaganites were alarmed by the potential costs of a trade war and therefore opposed the actual imposition of tariffs.236 Many business groups feared that tariffs would increase the cost of intermediate goods, such as steel, thus making their final product, such as cars, uncompetitive. Given that the producers of final products accounted for a greater share of employment than the producers of intermediate goods, one may have expected the president to follow the interests of these business groups and maintain free trade.237 However, Trump chose once again to honour his isolationist instincts. He followed the advice of China hawks such as Peter Navarro, despite their mediocre power base within the White House and moved to reshape trade relations. Trump withdrew the United States from the reviled NAFTA accord, as well as from the TransPacific Partnership shortly after taking office. He slapped comprehensive tariffs on imports of steel and aluminium, even hitting imports from allies such as Japan and the European Union. Most importantly, Trump levied tariffs targeting Chinese imports in 2018, again mostly hitting intermediate goods. He thus rode roughshod over the express interest of his business supporters and played to his isolationist base instead. Once China retaliated with tariffs of its own, Trump further escalated the dispute into a full-blown trade war by increasing both the share of imports covered by tariffs, as well as the tariff rate. He also doled out massive subsidies to farmers whose exports were affected by China’s retaliatory tariffs, again showing little reluctance to intervene in the economy when it fitted his aims.238 The trade war massively disrupted the previously close trading relationship between the United States and China, initiating a gradual decoupling of supply chains between both countries. However, like many other economic nationalists throughout history, Trump remained unwilling to cut off American access to foreign direct investment. Just as he had done in the 1980s, Trump generally continued to welcome foreign capital, which he saw as instrumental in

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rebuilding American manufacturing. However, his government did attempt to manage incoming investment more closely, for example by restricting the purchase of US assets by Chinese companies.239 Similarly, the administration pursued a relatively cautious approach to industrial policy. China hawks such as Peter Navarro pushed for a replication of Chinese aid to industry by subsidising domestic high-tech corporations in the United States. However, a comprehensive industrial policy remained hard to swallow for the traditionally free-market Republican Party. Trump and Navarro partially circumvented this difficulty by arguing that stagnant domestic innovation and the lack of a manufacturing base presented a national security risk. Reframing economic goals as serving military ends made the subsidisation of domestic companies and their research palatable to Republicans. Armed with this legitimacy, the administration could then leverage the government’s vast national security budget and America’s developed ecosystem of defence-related contractors for its ends.240 These efforts gained even greater prominence during the coronavirus pandemic, when the indigenisation of supply chains was similarly reframed as a matter of national security.241 Overall, the Trump administration pushed its isolationist agenda on many fronts and sometimes to great effect, despite its chaotic mode of governance and despite sometimes opposing business interests. Trump’s impact on policy discourse is also readily visible within the Democratic Party. Defending workers against unfettered globalisation had once been a core plank of the Democratic platform. The self-described ‘democratic socialist’ Bernie Sanders (1941–) had unsuccessfully campaigned on this basis for the Democratic nomination in 2016. At the time, Sanders’ campaign had been widely seen as lying outside the party mainstream, so that the nomination had gone to Hilary Clinton. This changed after the electoral success of Trump’s economic nationalism. Not only did anti-globalisation points move back into the Democratic Party mainstream, but its candidates frequently placed these arguments on a nationalist footing. A leading example of this trend is Elizabeth Warren, who campaigned for the Democratic nomination in the 2020 election.242 Her detailed economic plans attempted to counteract Trump’s platform under the slogan of ‘Economic Patriotism’. This idea focussed on the two areas where Trump’s economic nationalism was arguably the least developed: Regulation of multinational corporations and industrial policy. On the first topic, Warren proposed to ‘put American workers and middle-class prosperity ahead of multinational profits and Wall Street bonuses’.243 She harshly criticised firms who had offshored jobs to lowwage countries ‘all in the interest of serving multinational capital with no particular loyalty to the United States’.244 Warren promised to abrogate the tax policy that bestowed benefits unto these unpatriotic businesses. This was an attempt to undermine Trump’s credibility as a nationalist, tainted as it was by

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his proximity to international capital and business-friendly tax policy. Warren also criticised the incumbent administration for not having employed industrial policy tools to their fullest extent, thereby surrendering the field to Germany and the Made in China 2025 initiative of the CCP.245 Instead, Warren promised to increase spending on high-tech industries and export promotion. Moreover, American manufacturing was to be protected by carbon border taxes and through ‘Buy American’ public procurement policies. ‘We will engage in international trade’, Warren declared, ‘but on our terms and when it benefits American families’.246 While Warren and Trump differed in their toolbox for protecting manufacturing, they agreed on the necessity of doing so. The quest for autonomy from global markets has thus become embedded within both of America’s major political parties. The eventual Democratic nominee, Joe Biden, therefore decided to follow the new anti-globalisation consensus, although he had previously not distinguished himself as an opponent of free trade and international finance. In the 2020 campaign, however, he largely followed Warren’s line. In his Plan to Fight for Workers by Delivering on Buy America and Make It in America, he did not attack Trump for being an economic nationalist. Rather, he blasted the incumbent for not being patriotic enough: ‘President Trump chooses multinational corporate interests over American workers again and again.’ Trump had even failed in his basic promise to curtail trade imbalances, because our ‘global trade deficit in goods and our trade deficit in goods with Mexico has hit an all-time high, and our trade deficit with China spiked in July and August’.247 Biden promised to make economic nationalism efficient again, pledging that ‘the piecemeal and ineffective approach of the Trump Administration will be replaced with a coordinated and effective strategy’. He promised a reform of the corporate tax code, a stringent ‘Buy American’ procurement policy, subsidies to domestic manufacturing and a repatriation of supply chains ‘to ensure Americans don’t have to depend on foreign imports for lifesaving products and products critical to our national security’.248 These were not just empty campaign promises. In his first two years after he had secured the presidency, Biden followed through on several of these promises. The new president signed an ambitious order for federal agencies to ‘Buy American’ in the first month of his term. He also stepped up efforts to invest in domestic manufacturing, especially in ‘critical’ supply chains such as semiconductors. And while Biden did abolish the tariffs on America’s allies, he did not immediately return to free trade, instead replacing the tariffs with a quota system. Crucially, he did not quickly revise the hefty tariffs Trump had slammed on Chinese imports. On the contrary, Biden continued efforts to decouple from China, for example by prohibiting American companies from investing in selected Chinese assets.249 The trade war was replaced by a fragile and heavily armed truce.

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9 Conclusion and Outlook: Explaining Economic Nationalism

Writing a conclusion to an ongoing history is necessarily fraught with danger, and providing an outlook on future developments is even more so. There are two ways to mitigate these risks. I commence by distilling the historical cases analysed so far into a few general conclusions that shed light on the emergence of economic nationalism. Such an understanding of causes is one way to guide an outlook. The second path is the extrapolation of present trends. The trends of the 2010s discussed in the final chapter offer a useful starting point. Combining an appreciation of causes with an awareness of trends offers reason to speculate that nationalist conceptions of the economy will persist. *

Any understanding of the causes of economic nationalism must take the tension within this tradition into account. It therefore makes sense to separate the causes underlying isolationist and expansionist strands. At the most fundamental level, expansionist economic nationalism is a product of international inequality. The historical record suggests that nationalists will often call for an expansion of production and a mobilisation of domestic social forces when a large gap in income exists between their nation and others. More subtly, we have seen that expansionist nationalists are quite likely to accept engagement with the world economy in order to earn export receipts, court foreign investment and import technology, if this helps them realise their goal of attaining economic parity. This has been a defining feature of nationalism during the globalisations of the late nineteenth and late twentieth centuries. Furthermore, a developmental gap is a necessary but not sufficient condition for ideologies of catch-up growth. Such a gap is perceived as more threatening if it corresponds to political inequalities, for example if nationalists see the nation as subjugated by formal systems of colonialism or informal modes of imperialism. This constellation provided a powerful impetus to developmental ideas in Meiji Japan and late Qing China. In times when the nation’s political sovereignty is in peril, nationalists often perceive economic development as a very pressing task and therefore have fewer qualms about sacrificing some economic sovereignty. Finally, these developmental ideologies need not necessarily be widely accepted to be influential – we have 323

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encountered many cases where they are practised by relatively small circles of political elites close to the levers of power (Alexander Hamilton and Sergei Witte being good examples). Isolationist economic nationalism is also a reaction to inequality. However, isolationists react to social dislocation within the nation, which they believe undermines national unity. These internal inequalities are blamed on exposure to economic integration. For example, globalisation may erode an established division of labour within the nation or encourage the rise of ‘elites’ connected to international exchange, such as merchants or bankers. Isolationist nationalists then seek to ‘restore’ domestic equality or unity by restricting international economic exchange. As these nationalists are concerned about the internal rather than the international distribution of income, this type can appear in both rich and poor countries. We have seen the emergence of these ideas in Bolivia and the United States over the past twenty years, two countries with very different levels of per capita income. Motives for isolation can be especially powerful when the economy’s international sectors are subject to substantial foreign ownership. ‘Foreign’ in these cases may refer both to international investors as well as to local ethnic minorities that are depicted as alien. Isolationist ideas are therefore particularly virulent where economic inequality coincides with ethnic divisions, for example, if an ethnic minority happens to specialise in functions associated with foreign trade or banking. Examples of minorities targeted in such constellations include Armenians in the Ottoman Empire, Jews in interwar Germany and ethnic Chinese in Malaysia. Given that isolationist nationalists frequently oppose ‘internationalised’ elites, they often overlap with populist movements, for whom anti-elitism is the defining feature. We have encountered this pattern in various locations, including postwar Argentina and Egypt, as well as within today’s European Union. The anti-elitist strain of many isolationist movements also implies that they are more likely to form grassroots movements. There have indeed been many cases where mass mobilisation transformed nationalist movements from expansionist to isolationist types, with the United States in the early nineteenth century being an archetypical case. However, not all isolationist ideas are necessarily built on popular support. A concern for domestic unity can also appeal to conservatives looking to defend an established social order that they see as being undermined by globalisation. The nineteenth-century French protectionists or the German Romantics fall into this category. In many cases, as we have seen, a mix of expansionist and isolationist motives is likely to occur simultaneously. In these cases, the Nationalist Dilemma suggests that nationalists will need to compromise on their aims. If they cannot do so, the direction of economic policy is often contested between nationalist factions. For instance, Indian nationalists during the colonial period blamed British-led integration for either India’s overall poverty

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(Ranade), or for internal social dislocations (Gandhi). As a result, expansionist and isolationist strands competed for influence in India, with the latter eventually emerging predominant. Isolationist nationalism is more likely to gain traction in the presence of interstate wars, as illustrated by China in the 1930s. Wars increase the salience of nationality and increase opposition to foreign ownership of ‘strategic’ assets. Moreover, they typically provide an opening for existing economic nationalists to push through programmes of isolation because dislocations due to war diminish the cost of high borders. Economic downturns (or pandemics) will have similar effects; as trade and investment collapse, autarky becomes less costly. This is of course unsurprising for anyone familiar with the economic history of the 1930s. Less familiar is the importance of price movements in primary products (agricultural and raw materials) in encouraging both isolationist and expansionist nationalism to appear. What unites both strands is that they are typically propagated by those who see themselves as underdogs. Expansionists see their nation in a weak position internationally, often because it is the producer of primary rather than industrial products. Isolationists resent their perceived domestic subordination, which often correlates with a rural status. It follows that in both cases, declines in the international price for primary products will increase the salience of nationalist programmes. Expansionists are more likely to be successful in pushing for a transition from agriculture to industry. Isolationists are more likely to galvanise support for the idea that the nation is torn apart by increasing inequality between rural and urban populations. Falling commodity prices were particularly important in the 1870s, but they similarly motivated Romanian thinkers of the interwar period, as well as Malaysia’s Mahathir Mohamad in the 1980s. As many crises to which economic nationalists react, such as wars, depressions, agricultural crises or pandemics, are often of a global nature, we can observe a clustering of successful nationalist movements at certain points in time. This includes the 1870s, 1890s, much of the interwar period, the 1970s and finally the 2010s. The joint appearance of these movements in different contexts around the world is heightened by the fact that nationalist programmes tend to reinforce each other. First, there are direct links of intellectual transmission and material support. Friedrich List’s intellectual biography is a case in point – but Mihail Manoilescu and Henry Carey similarly had a global reach. Second, successful nationalist movements invite imitation by others. A number of rapidly industrialising countries have provided inspiration for nationalists across the globe: the United States in the 1870s, Germany in the 1890s, Japan in the 1970s, China today. Third, increased barriers to economic exchange by one country will often lead to retaliation by those who perceive themselves as competitors (as demonstrated by American, European and Indian reactions to Chinese techno-nationalism in the 2010s). In other

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words, global crises provide both impulse and opportunity to nationalist movements worldwide. None of this should mean that the appearance of economic nationalism is perfectly explained by concurrent economic crises or wars. Crises often exert lasting legacy effects on the perceptions of policymakers. The long aftershocks of the 2008 global financial crisis illustrate this. Policies inspired by a moment of turmoil may then be implemented long after the fact. Similarly, the move towards protectionism in the British Empire, which was briefly successful in the 1930s, built on ideas that had germinated as a reaction to the rise of Germany thirty years earlier. At other times, nationalists may be forwardlooking (indeed nationalists themselves have often believed that their ability to take a long-term view sets them apart from ‘mainstream’ policymakers). Nationalists are then not so much concerned with the existence of an absolute gap in incomes, but by a diminished expectation about closing this gap. For instance, a large gap in incomes existed between Western Europe and most Latin American countries for much of the nineteenth century. This was not an issue for nationalists in Brazil. It only became an issue once the crises of the interwar years had convinced policymakers that the existing model of resource exports would not suffice to diminish this gap in the future. Finally, it may be useful to speculate about the factors leading to the absence of strong economic nationalist movements. This follows directly from the preceding discussion. In situations where perceived economic inequality is minimal, both globally and within the nation, or when these inequalities do not correspond to salient political divides, nationalist approaches to economics may not be powerful. The scant attention paid in this book to Europe and the United States in the immediate postwar decades (or the omission of egalitarian Scandinavian countries) is testament to that prediction. Having attained a general understanding of what causes nationalists to focus on the economy, we can briefly endeavour to glance forward. As inequality is clearly key in explaining economic nationalism, this is a good place to start. Within many countries, the incomes of top earners have grown rapidly since the 1980s. The rise of the rich is due to their earnings from international investments and due to work opportunities in the global marketplace. However, the effect of this trend on domestic inequality differs between developed and developing countries. In developed countries, the income growth of the middle classes has stagnated, partially due to import competition and offshoring. The steep rise in inequality between global top earners and local middle classes is one factor in the rise of isolationist populism we observed across the West in Chapter 8. In developing countries such as China, on the other hand, middle-class incomes grew fast, as these workers gained by engaging in export economies. Isolationism was therefore limited.1 What does this imply for the future? It is true that the institutions shaping domestic inequality can sometimes change suddenly, but they may not do so

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absent a large exogenous shock. Especially in the West, top earners have a large incentive to defend their perks (as witnessed by the business-friendly tax policy espoused by Donald Trump).2 Domestic inequality in the advanced countries may therefore continue for some time, suggesting that isolationist nationalism may not abate quickly. This is all the more likely given that these positions have appealed to a wide spectrum of opinion across the left and right. At the same time, income inequality between countries has declined over the past decades, largely due to strong growth in China and India.3 This could lead to a decrease in expansionist nationalism, although there are three factors that caution against such a conclusion. First, as noted above, it is not always the size of the income gap that matters. Even countries that have travelled a large distance in closing the gap with rich countries may still pursue developmental policies (witness, for example, Germany’s aggressive expansionism after 1890 or Japan’s export-led growth after the Second World War). What matters for nationalists is international parity, not the material comfort of their middle classes. This has implications for China’s trajectory. It is true that the Chinese leadership under Xi Jinping has increasingly accentuated goals other than growth in its ‘Common Prosperity’ agenda. These include a compression of domestic income inequality, much of it in the service of national unity. Yet we should be sceptical whether this means that the CCP has given up on growth and international parity, especially as political competition with the United States intensifies.4 Second, catch-up motivations may persist because economic inequality continues to be accentuated by political power imbalances. Informal spheres of influence persist, for example those enforced militarily by Russia on the territory of the former Soviet Union. Moreover, many nationalists do continue to see international institutions as stifling both economic and political sovereignty. We have seen this in attitudes towards the IMF, WTO and World Bank, but also in Euroscepticism. Interestingly, it is not necessarily the have-nots that rebel against supranational governance. Nationalists in rich countries, such as the United States, Britain and Germany have blamed the fiscal transfers associated with international organisations for diluting their own wealth. A similarly motivated revolt of the rich against a ‘lack’ of sovereignty lies at the root of many separatist movements in Europe, be it in Catalonia, northern Italy, Scotland or Flanders.5 Third, there are many countries in the Global South who are not converging to the income levels of the rich economies, and here classic catch-up motives may persist. Bolivia is a case in point, where we have seen the same fascination with industrialisation that has always characterised such nationalist programmes. Even in rich countries, the desire to rebuild a national manufacturing base continues to drive industrial policy. Neither should we reduce developmental programmes to manufacturing alone. The Bolivian case also

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shows that control over natural resources can serve developmental ends. This appeal of resource nationalism is not specific to Bolivia, or even Latin America, alone. Resource-rich countries across the African continent have witnessed protests against foreign, especially Chinese, ownership of mines and natural resources. These include demonstrations against foreign involvement in gold extraction in Ghana, gas pipelines in Tanzania and copper mines in Zambia. Chinese investors and traders have been frequent targets of protest. Like their counterparts in Bolivia, many African governments have accommodated this pressure by increasing state control over mining operations.6 These examples also underscore the continuing salience of foreign investors in spurring nativism. Chinese investors in Africa have joined the British industrialists, German bankers and American multinationals of previous eras as targets for nationalist anger.7 It may be objected that a modern transnational company, whose shareholders and operations are spread around the world, cannot possibly be assigned a ‘nationality’. While this may be true in an academic sense, this does not mean that nationalists will avoid operating with such labels. Moreover, as Donald Trump’s rhetoric demonstrates, modern transnationals can be attacked precisely for not having any local roots, even if they are not associated with a particular foreign competitor. Finally, as restrictions and sanctions against Chinese or Russian firms operating in some Western countries show, company nationality can still become highly politicised.8 A related objection could be that modern technology undermines the ability of states to protect their markets with old-fashioned protectionist tools. However, the US–China trade war suggests that the alleged inefficiency of tariffs does not imply that they will not be used (as they have been for these past centuries). We should also be sceptical of claims that technology is an impersonal global force that is not susceptible to nationalist attempts at indigenisation. Quite the opposite – we saw that contemporary Chinese industrial policy is focussed on domesticating high-tech industries. It is one of the ironies behind the rise of economic nationalism in the 2010s that it was precisely the global acceleration of innovation in digital technologies that motivated Chinese techno-nationalism. This in turn triggered isolationist backlashes around the world. Similarly, there seems little to commend in the Whiggish notion that the digital age and online shopping will create a borderless market where consumers will be unable to discriminate between ‘national’ and ‘foreign’ goods. The flareup of ‘Digital Swadeshi’ in India shows that digital industries can be subject to the same appeals of patriotic boycotts as the textile industries of old. In fact, digital technologies and blockchain may potentially help nationalists to track down the origin of products more efficiently, thus making the consumption of national products easier than it was in the age of Gandhi.9 While many will regret its presence, economic nationalism is here to stay.

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NOTES

1 Introduction: Nationalists Think About the Economy 1. Ben Chu, ‘What Is Steve Bannon’s “Economic Nationalism”? And Should We Be Scared?’ The Independent, 24 February 2017; Stuart Anderson, ‘Economists Say “Economic Nationalism” is Economic Nonsense’, Forbes, 25 February 2017; Matthew Yglesias, ‘Steve Bannon’s “Economic Nationalism” Is Total Nonsense’, vox.com, 21 August 2017. 2. David Armitage, Foundations of Modern International Thought (Cambridge University Press, 2012), 17–32; Samuel Moyn and Andrew Sartori (eds.), Global Intellectual History (Columbia University Press, 2013), 9–20; Mark Metzler, ‘The Cosmopolitanism of National Economics: Friedrich List in a Japanese Mirror’ in A. G. Hopkins (ed.), Global History: Interactions Between the Universal and the Local (Palgrave, 2006), 98–130. 3. Ernest Gellner, Nations and Nationalism (Blackwell, 1983), 1–7. Other authors who have followed Gellner’s influential definition include: Eric J. Hobsbawm, Nations and Nationalism since 1780: Programme, Myth, Reality (Cambridge University Press, 1992), 9; Michael Hechter, Containing Nationalism (Oxford University Press, 2000), 7. All these build on the conceptualisation of nationalism as self-governance in Elie Kedourie’s Nationalism (Hutchinson University Library, 1961), 3–4. 4. This motive is prominent in the older literature on the topic: Michael Heilperin, Studies in Economic Nationalism (Libraire Droz, 1960), 15–18; Otto Hieronymi, ‘The New Economic Nationalism’ in Otto Hieronymi (ed.), The New Economic Nationalism (Macmillan, 1980), 11–33. Among nationalism scholars, this motive has also been noted by: Anthony D. Smith, National Identity (Penguin Books, 1991), 10, 16. 5. George Crane, ‘Economic Nationalism: Bringing the Nation Back in’ Millennium 27 (1998), 55–75. 6. Sam Pryke, ‘Economic Nationalism: Theory, History and Prospects’ Global Policy 3 (2012), 281–91; James Mayall, Nationalism and International Society (Cambridge University Press, 1990), 89–95. 7. William Coleman, Economics and Its Enemies: Two Centuries of Anti-Economics (Palgrave Macmillan, 2002), 65–89. 8. Rawi Abdelal, National Purpose in the World Economy: Post-Soviet States in Comparative Perspective (Cornell University Press, 2001), 103–26. 9. Stephen Shulman, ‘Nationalist Sources of International Economic Integration’ International Studies Quarterly 44 (2000), 365–90; Abdelal, National Purpose, 24–44.

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10. On economic identities: Eric Helleiner, ‘The Meaning and Contemporary Significance of Economic Nationalism’ in Eric Helleiner and Andreas Pickel (eds.), Economic Nationalism in a Globalizing World (Cornell University Press, 2005), 220–34; Andreas Pickel, ‘Explaining, and Explaining with, Economic Nationalism’ Nations and Nationalism 9 (2003), 105–27. 11. Anthony D. Smith The Antiquity of Nations (Polity Press, 2004), 211–35. 12. Among nationalism scholars, the nationalist desire to become ‘modern’ and ‘industrial’ has been noted by Tom Nairn, The Break-Up of Britain (NLB, 1977), 339–57. 13. Authors who emphasise the defense, development or expansion of national sovereignty as a goal include Adrian Hastings, The Construction of Nationhood (Cambridge University Press, 1997), 3–4 and John Breuilly, Nationalism and the State (Manchester University Press, 1993), 2. 14. David Balaam and Bradford Dillman, Introduction to International Political Economy (Routledge, 2018), 53–77; Eric Helleiner, The Neomercantilists (Cornell University Press, 2021). 15. Albert Hirschman, The Strategy of Economic Development (Yale University Press, 1958), 7–11; Walt Rostow, ‘The Stages of Economic Growth’ The Economic History Review 12 (1959), 1–16; Alexander Gerschenkron, Backwardness in Historical Perspective; A Book of Essays (Belknap Press, 1962), 5–30. 16. An ‘expansionist’ definition is employed by: Anthony D’Costa, ‘Capitalism and Economic Nationalism: Asian State Activism in the World Economy’ in Anthony D’Costa (ed.), Globalization and Economic Nationalism in Asia (Oxford University Press, 2012), 1–32. 17. Christine Harlen, ‘A Reappraisal of Classical Economic Nationalism and Economic Liberalism’ International Studies Quarterly 43 (1999), 733–44. On the general compatibility of some aspects of nationalism with political liberalism, see: Michael Freeden, ‘Is Nationalism a Distinct Ideology?’ Political Studies XLVI (1998), 748–65; Yael Tamir, Liberal Nationalism (Princeton University Press, 1993). 18. Tom Campbell and Ian Ross, ‘The Utilitarianism of Adam Smith’s Policy Advice’ Journal of the History of Ideas 42 (1981), 73–92. 19. Two authors coming close to recognising a trade-off between isolationist and expansionist aims: Shulman, ‘Nationalist Integration’, 373–5; Harry Johnson, ‘Ideology of Economic Policy in New States’ in Harry Johnson (ed.), Economic Nationalism in Old and New States (George Allen and Unwin, 1968), 124–41. Similar trade-offs are well-established in international relations theory: Robert Keohane and Joseph Nye Jr, Power and Interdependence (Pearson, 2012), 8–16, 34. They also appear in political geography and political economy: Jean Gottmann, The Significance of Territory (University Press of Virginia, 1973), 17–24; Branko Milanovic, ‘Nations, Conglomerates, and Empires: The Trade-off Between Income and Sovereignty’ in Dominic Salvatore, Marjan Svetlicic and Joze Damijan (eds.), Small Countries in a Global Economy (Palgrave, 2000), 25–70. 20. On communities: Takeshi Nakano, ‘Theorising Economic Nationalism’ Nations and Nationalism 10 (2004), 211–29; Thomas Fetzer, ‘Beyond “Economic Nationalism”: Towards a New Research Agenda for the Study of Nationalism in Political Economy’ Journal of International Relations and Development (2021), 1–25; Benedict Anderson, Imagined Communities: Reflections on the Origin and Spread of Nationalism (Verso books, 1983).

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21. On the confluence of nationalism and socialism in the Global South: Branko Milanovic, Capitalism, Alone (Harvard University Press, 2019), 79–82. 22. Eric Helleiner, ‘The Return of National Self-Sufficiency? Excavating Autarkic Thought in a De-Globalizing Era’ International Studies Review (2021), 1–25. 23. Gottmann, Territory, 101–08; Tiago Saraiva and M. Norton Wise, ‘Autarky/ Autarchy: Genetics, Food Production, and the Building of Fascism’ Historical Studies in the Natural Sciences 40 (2010), 419–28. 24. Eric Helleiner, ‘Economic Nationalism As a Challenge to Economic Liberalism? Lessons from the 19th Century’ International Studies Quarterly 46 (2002), 307–29; Andreas Pickel, ‘False Oppositions’ in Eric Helleiner and Andreas Pickel (eds.), Economic Nationalism in a Globalizing World (Cornell University Press, 2005), 1–11. 25. One example of the argument that economic nationalism serves powerful interest groups is: Jacqui True, ‘Country before Money?’ in Eric Helleiner and Andreas Pickel (eds.), Economic Nationalism in a Globalizing World (Cornell University Press, 2005), 202–19. 26. John Maynard Keynes, The General Theory of Employment, Interest, and Money (Cambridge University Press, [1936] 2013), 384; Mark Blyth, Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century (Cambridge University Press, 2002), 17–45. The best-known account of economic nationalism from an ideational perspective is: Liah Greenfeld, The Spirit of Capitalism (Harvard University Press, 2009). 27. David Hume, Political Essays (Cambridge University Press, [1777] 1994), 30. My position here is close to constructivism: Alexander Wendt, Social Theory of International Politics (Cambridge University Press, 1999), Ch. 3; Dani Rodrik, ‘When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations’ Journal of Economic Perspectives 28 (2014), 189–208. 28. The example draws on the theoretical frameworks in: George Akerlof and Rachel Kranton, ‘Economics and Identity’ The Quarterly Journal of Economics 115 (2000), 715–53; Moses Shayo, ‘Social Identity and Economic Policy’ Annual Review of Economics 12 (2020), 355–89; David Atkin, Eve Colson-Sihra and Moses Shayo, ‘How Do We Choose Our Identity? A Revealed Preference Approach Using Food Consumption’ Journal of Political Economy 129 (2021), 1193–251. The historical material is from Section 5.5, ‘Fighting for Industry’, which draws heavily on: Karl Gerth, China Made: Consumer Culture and the Creation of the Nation (Harvard University Press, 2003). 29. John Kurt Jacobsen, ‘Much Ado About Ideas: The Cognitive Factor in Economic Policy’ World Politics 47 (1995), 283–310; Thomas Fetzer, ‘Nationalism in Political Economy Scholarship’ in Stefan Berger and Thomas Fetzer (eds.), Nationalism and the Economy: Explorations into a Neglected Relationship (Central European University Press, 2019), 43–63; Pierre Bourdieu, ‘The Social Conditions of the International Circulation of Ideas’ Actes de la recherche en sciences sociales 5 (2002), 3–8. 30. John L. Campbell, ‘Institutional Analysis and the Role of Ideas in Political Economy’ Theory and Society 27 (1998), 377–409. 31. It follows that there exists a succession in the conceptualisation of nationalism, evolving from one more focused on the interplay of structure and ideas to one more focused on ‘nationalism as politics’. On these distinctions see: John Breuilly,

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32. 33. 34. 35. 36.

37.

38. 39. 40.

41. 42. 43. 44. 45. 46. 47. 48.

notes to pages 8–13 ‘Approaches to Nationalism’ in Gopal Balakrishnan (ed.), Mapping the Nation (Verso, 1996), 146–74. Max Weber, The Theory of Social and Economic Organization (The Free Press, [1922] 1947). Weber, Theory, 90, 94, 101–09. Stefan Eich and Adam Tooze, ‘The Allure of Dark Times: Max Weber, Politics, and the Crisis of Historicism’ History and Theory 56 (2017), 197–215. Weber, Theory, 95. Liah Greenfeld, Nationalism: Five Roads to Modernity (Harvard University Press, 1992), 1–27. Note that narratives matter even for those scholars emphasising the ethnic ‘navel’ of nations: Anthony D. Smith, The Ethnic Origins of Nations (Blackwell, 1986), 1–8. Most authors seeking to prove a link between nationalism and growth only examine rapidly growing economies. In other words, they select on the dependent variable. An example: Greenfeld, Spirit of Capitalism. A less convincing attempt: Carl Mosk, Nationalism and Economic Development in Modern Eurasia (Routledge, 2013). A similar point is made by: Adam Tooze, The Wages of Destruction: The Making and Breaking of the Nazi Economy (Allen Lane, 2006), xix. Weber, Theory, 109–12, 117; Breuilly, Nationalism and the State, 1–2 similarly argues from ideal types. For an economic account of protectionism see: Kevin H. O’Rourke, ‘Economic History and Contemporary Challenges to Globalization’ Journal of Economic History 79 (2019), 356–82; Douglas Irwin, Against the Tide: An Intellectual History of Free Trade (Princeton University Press, 1996). Edward Hallett Carr, Nationalism and After (Macmillan, [1945] 1968), 5–6, 22, 45; Shulman, ‘Nationalist Integration’, 366; Irwin, Against the Tide, 26–44. Hobsbawm, Nations and Nationalism since 1780, 1–45. Istvan Hont, Jealousy of Trade: International Competition and the Nation-State in Historical Perspective (Harvard University Press, 2005), 122–56. Weber, Theory, 96–8. Sebastian Conrad, What is Global History? (Princeton University Press, 2016), 1–11. A similar approach is taken by the contributions in: Andreas Pickel (ed.) Handbook of Economic Nationalism (Edward Elgar, 2022). Weber, Theory, 93–6. Economic history plays a central role in: Henryk Szlajfer, Economic Nationalism and Globalization: Lessons from Latin America and Central Europe (Brill, 2012).

2 The American Community of the Common Man, 1776–1860 1. Lindsay Regele, Manufacturing Advantage: War, the State, and the Origins of American Industry, 1776–1848 (Johns Hopkins University Press, 2019), 1–13, 33– 7. 2. Christopher Calvo, The Emergence of Capitalism in Early America (University Press of Florida, 2020), chs. 5, 7. 3. Judith Goldstein, Ideas, Interests and American Trade Policy (Cornell University Press, 1993), 39–77.

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4. John McCusker and Russell Menard, The Economy of British America 1607–1789 (University of North Carolina Press, 1991), 46, 352–6. 5. McCusker and Menard, British America, 285–6. 6. Lawrence Peskin, Manufacturing Revolution: The Intellectual Origins of Early American Industry (John Hopkins University Press, 2003), 33–9. 7. Terrence Witkowski, ‘Colonial Consumers in Revolt: Buyer Values and Behavior During the Nonimportation Movement, 1764–1776’ Journal of Consumer Research 16 (1989), 216–26. 8. Letter to Timothy Folger, 29 September 1769, Franklin Papers; Peskin, Manufacturing Revolution, 30–3. 9. Gordon Bjork, ‘The Weaning of the American Economy: Independence, Market Changes, and Economic Development’ Journal of Economic History 24 (1964), 541–60. 10. Cathy Matson and Peter Onuf, A Union Of Interests: Political and Economic Thought in Revolutionary America (University Press of Kansas, 1990), 31–49; Charles Calomiris, ‘Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental’ Journal of Economic History 48 (March 1988), 47–68. 11. E. James Ferguson, ‘The Nationalists of 1781–1783 and the Economic Interpretation of the Constitution’ Journal of American History 56 (1969), 241–4. 12. Ferguson, Nationalists, 251. 13. Ferguson, Nationalists, 247. 14. Richard Sylla, ‘Reversing Financial Reversals: Government and the Financial System since 1789’ in Price Fishback (ed.) Government and the American Economy (University of Chicago Press, 2007), 120. 15. Drew McCoy, The Elusive Republic: Political Economy in Jeffersonian America (Norton, 1982), 133. 16. Ferguson, ‘Nationalists’, 250. 17. Ferguson, ‘Nationalists’, 251–2. 18. McCoy, Elusive Republic, 10; Joseph Dorfman, The Economic Mind in American Civilization, 1606–1865, Volume I (Kelley, 1966), 434–5. 19. Thomas Jefferson, ‘Notes on the State of Virginia’ (1788), Query XIX, reprinted in Michael Folsom and Steven Lubar (eds.) The Philosophy of Manufactures (MIT Press, 1982), 16–17. 20. Brian Steele, Thomas Jefferson and American Nationhood (Cambridge University Press, 2012), 103; McCoy, Elusive Republic, 6–8. 21. Jefferson, ‘Notes’, Query XIX. 22. Jefferson, ‘Notes’, Query XIX. 23. Steele, Thomas Jefferson, 1–5; Liah Greenfeld, The Spirit of Capitalism: Nationalism and Economic Growth (Harvard University Press, 2001) 399–401. 24. McCoy, Elusive Republic, 136–41. 25. Merrill Peterson, ‘Thomas Jefferson and Commercial Policy, 1783–1793’ William and Mary Quarterly 22 (1965), 584–610. 26. McCoy, Elusive Republic, 140. 27. John Crowley, The Privileges of Independence: Neomercantilism and the American Revolution (Johns Hopkins University Press, 1993), 94–116. 28. Peskin, Manufacturing Revolution, 75–9. 29. Peskin, Manufacturing Revolution, 71–5, 82–4. 30. Dorfman, Economic Mind, I, 252–3. 31. Peskin, Manufacturing Revolution, 93–8; Dorfman, Economic Mind, I, 253–7.

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32. Eoin Magennis, ‘Mathew Carey, “Protecting Duties,” and the Dublin Crowd in the Early 1780s’ Éire-Ireland 50 (2015), 173–98; James Livesey, ‘Free Trade and Empire in the Anglo-Irish Commercial Propositions of 1785’ Journal of British Studies 52 (2013), 103–27; James Kelly, ‘Mathew Carey’s Irish Apprenticeship: Editing the Volunteers Journal, 1783–84’ Éire-Ireland 49 (2014), 201–43. 33. Peskin, Manufacturing Revolution, 61–71. 34. Stephen Meardon, ‘“A Reciprocity of Advantages”: Carey, Hamilton, and the American Protective Doctrine’ Early American Studies 11 (2013), 441. 35. Magennis, ‘Dublin Crowd’, 188. 36. Meardon, ‘Reciprocity of Advantages’, 437–8. 37. Ferguson, ‘Nationalists’, 244. 38. William Williams, ‘The Age of Mercantilism: An Interpretation of the American Political Economy, 1763 to 1828’ William and Mary Quarterly 15 (1958), 419–37; Matson and Onuf, Union of Interests, 67–81; Crowley, Privileges of Independence, xi–xiii. 39. Cathy Matson, ‘Capitalizing Hope: Economic Thought and the Early National Economy’ Journal of the Early Republic 16 (1996), 275. 40. Gary Walton and James Shepherd, The Economic Rise of Early America (Cambridge University Press, 1979), 187–8; Crowley, Privileges of Independence, 117–33. 41. Matson and Onuf, Union of Interests, 124–46. 42. Ron Chernow, Alexander Hamilton (Penguin, 2004), 29–30. 43. McCoy, Elusive Republic, 133; Chernow, Alexander Hamilton, 48–52. 44. Edward Bourne, ‘Alexander Hamilton and Adam Smith’ Quarterly Journal of Economics 8 (1894), 328; Chernow, Alexander Hamilton, 296; Eli Cook, The Pricing of Progress (Harvard University Press, 2017), 49–57. 45. Bourne, Hamilton and Smith, 328–44; Dorfman, Economic Mind, I, 287–8; Peskin, Manufacturing Revolution, 114. 46. Dorfman, Economic Mind, I, 410. 47. Alexander Hamilton, ‘Second Report on the Provision Necessary for Establishing Public Credit (Report on a National Bank)’, Annals of the 1st Congress of the United States, 14 December 1790 (Gales and Seaton, 1834), 2039–41; Alexander Hamilton, ‘Report on the Subject of Manufactures’, Annals of the 2nd Congress of the United States, 5 December 1791 (Gales and Seaton, 1849), 1004–5. 48. Greenfeld, Spirit of Capitalism, 393–5. 49. McCoy, Elusive Republic, 133. 50. Alexander Hamilton, ‘Report Relative to a Provision for the Support of Public Credit’, Annals of the 1st Congress of the United States, 9 January 1790 (Gales and Seaton, 1834), 1993; Hamilton, Report on Manufactures, 971; Greenfeld, Spirit of Capitalism, 396. 51. Hamilton, ‘National Bank’, 2034. 52. Hamilton, ‘National Bank’, 2031. 53. Hamilton, ‘Public Credit’, 1993–4, 1999; Hamilton, ‘Report on Manufactures’, 980, 1015. 54. Hamilton, ‘Public Credit’, 2021; Hamilton, ‘National Bank’, 2037, 2042; Hamilton, ‘Report on Manufactures’, 994. 55. Hamilton, ‘Public Credit’, 2014; Alexander Hamilton, ‘Report on a Plan for the Further Support of Public Credit (Valedictory Report)’ Annals of the 3rd Congress of the United States, 16 January 1795 (Gales and Seaton, 1849), 1360, 1355–7.

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notes to pages 21–6 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77.

78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91.

92. 93.

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Hamilton, ‘Public Credit’, 1995–1998. Chernow, Alexander Hamilton, 299. Hamilton, ‘Public Credit’, 1993, 2000. Hamilton, ‘National Bank’, 2034. Sylla, ‘Financial Reversals’, 122. Hamilton, ‘National Bank’, 2049. Hamilton, ‘National Bank’, 2037, 2046–7, 2051–2. Chernow, Alexander Hamilton, 302. Greenfeld, Spirit of Capitalism, 399. Sylla, ‘Financial Reversals’, 123. Hamilton, ‘Report on Manufactures’, 971, 980. Hamilton, ‘Report on Manufactures’, 980–4. Hamilton, ‘Report on Manufactures’, 981. Meardon, ‘Reciprocity of Advantages’, 444–6. Hamilton, ‘Report on Manufactures’, 987. Hamilton, ‘Report on Manufactures’, 1012, 1033–4. Hamilton, ‘Report on Manufactures’, 988–90. Hamilton, ‘Report on Manufactures’, 1011, 1018–32. Douglas Irwin, ‘The Aftermath of Hamilton’s ‘Report on Manufactures’’ Journal of Economic History 64 (2004), 801. Hamilton, ‘Report on Manufactures’, 1009–12. Peskin, Manufacturing Revolution, 114. Andrew Shankman, ‘ ‘‘A New Thing on Earth’’: Alexander Hamilton, ProManufacturing Republicans, and the Democratization of American Political Economy’ Journal of the Early Republic 23 (2003), 331–3. Alexander Hamilton, Prospectus for the Society for Establishing Useful Manufactures, Philadelphia, August 1791, 1. Peskin, Manufacturing Revolution, 114–18. John R. Nelson, ‘Alexander Hamilton and American Manufacturing: A Reexamination’ The Journal of American History 65 (1979), 971–95. Irwin, ‘Aftermath’, 800–21. Jacob Cooke, ‘Tench Coxe, Alexander Hamilton, and the Encouragement of American Manufactures’ The William and Mary Quarterly 32 (1975), 369–92. Doron Ben-Atar, ‘Alexander Hamilton’s Alternative: Technology Piracy and the Report on Manufactures’ The William and Mary Quarterly 52 (1995), 389–414. Douglas Irwin, Clashing over Commerce. A History of US Trade Policy (University of Chicago Press, 2017), 91. Irwin, Clashing over Commerce, 89. Chernow, Alexander Hamilton, 296. Irwin, Clashing over Commerce, 94–5. Irwin, Clashing over Commerce, 85; Chernow, Alexander Hamilton, 322. Irwin, Clashing over Commerce, 92–3. John Harper, American Machiavelli: Alexander Hamilton and the Origins of U.S. Foreign Policy (Cambridge University Press, 2004), 140–50, 157–9. Meardon, ‘Reciprocity of Advantages’, 450–2; Cathy Matson, ‘Mathew Carey’s Learning Experience: Commerce, Manufacturing, and the Panic of 1819’ Early American Studies 11 (2013), 461; Irwin, Clashing over Commerce, 88. Shankman, ‘Democratization’, 323–52. Shankman, ‘Democratization’, 336; Peskin, Manufacturing Revolution, 117.

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94. A Farmer [George Logan], ‘Five letters addressed to the yeomanry of the United States’ The American Museum 12 (October 1792), Letter IV. 95. Logan, ‘Letters’, IV. 96. Peskin, Manufacturing Revolution, 115. 97. Matson, ‘Capitalizing Hope’, 284; Shankman, Democratization, 340. 98. Peskin, Manufacturing Revolution, 111. 99. Douglas Irwin, ‘The Welfare Cost of Autarky: Evidence from the Jeffersonian Trade Embargo, 1807–09’ Review of International Economics 13 (2005), 632–6. 100. Irwin, Clashing over Commerce, 116. 101. McCoy, Elusive Republic, 236–9. 102. Irwin, Clashing over Commerce, 122. 103. Irwin, Clashing over Commerce, 122. 104. Ronald Findlay and Kevin H. O’Rourke, Power and Plenty: Trade War, and the World Economy in the Second Millennium (Princeton University Press), 375. 105. Greenfeld, Spirit of Capitalism, 411; Irwin, Aftermath, 818; Charles Sellers, The Market Revolution: Jacksonian America, 1815–1846 (Oxford University Press, 1991), 62. 106. Daniel Walker Howe, What Hath God Wrought: The Transformation of America, 1815–1848 (Oxford University Press, 2007), 116–20, 226; Sellers, Market Revolution, 42. 107. Sellers, Market Revolution, 72. 108. Howe, Transformation of America, 71, 81. 109. Matson, Learning Experience, 471–2. 110. Letter by Jefferson to Benjamin Austin, 9 January 1816. 111. Irwin, Clashing over Commerce, 128. 112. Shankman, ‘Democratization’, 339. 113. George W. Custis, ‘An Address on the Importance of Encouraging Agriculture and Domestic Manufactures’ (Alexandria, VA, 1808) reprinted in: Michael Folsom and Steven Lubar (eds.), The Philosophy of Manufactures (MIT Press, 1982), 154. 114. George Logan, ‘The Constitution of the Lancaster County Society For Promoting of Agriculture, Manufactures, and the useful Arts’ (Lancaster, PA, 1800) reprinted in: Michael Folsom and Steven Lubar (eds.), The Philosophy of Manufactures (MIT Press, 1982), 127. 115. Matson, ‘Capitalizing Hope’, 281. 116. Custis, ‘An Address’, 152. 117. Matson, ‘Learning Experience’, 462; Peskin, Manufacturing Revolution, 115. 118. Matson, ‘Learning Experience’, 473, 477. 119. Matson, ‘Learning Experience’, 468. 120. Mathew Carey, Essays on Political Economy; or the Most Certain Means of Promoting the Wealth, Power, Resources, and Happiness of Nations (M. Carey, 1822). 121. Daniel Raymond, Thoughts on Political Economy in Two Parts (Fielding Lucas, 1820); Dorfman, Economic Mind, 566–7; Frank Petrella, ‘Daniel Raymond, Adam Smith, and Classical Growth Theory: An Inquiry into the Nature and Causes of the Wealth of America’ History of Political Economy 19 (1987), 239–59. 122. Donald Frey, ‘The Puritan Roots of Daniel Raymond’s Economics’ History of Political Economy 32 (2000), 607–29.

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123. Subsequent editions in 1823, 1836 and 1840 were retitled ‘Elements of Political Economy’, with the fourth and last edition undergoing most changes: Paul Conkin, Prophets of Prosperity: America’s first political economists (Indiana University Press, 1980), 77–8. 124. Raymond, Thoughts, 27. 125. Conkin, Prophets of Prosperity, 78–81. 126. Raymond, Thoughts, 34, 363. 127. Charles Patrick Neill, ‘Daniel Raymond. An Early Chapter in the History of Economic Theory in the United States’ Historical and Political Science 15 (1897), 42–5. 128. Raymond, Thoughts, 28–34. 129. Raymond, Thoughts, 35, 433; Dorfman, Economic Mind, 571. 130. Raymond, Thoughts, 347. 131. Raymond, Thoughts, xi. 132. Conkin, Prophets of Prosperity, 89–91, 96, 99. 133. Conkin, Prophets of Prosperity, 90. 134. Raymond, Thoughts, 275–6; Conkin, Prophets of Prosperity, 94, 105. 135. Raymond, Thoughts, 377. 136. Raymond, Thoughts, 379; Dorfman, Economic Mind, 568. 137. Dorfman, Economic Mind, 567. 138. Raymond, Thoughts, 452. 139. Raymond, Thoughts, 432. 140. Raymond, Thoughts, 433. 141. Conkin, Prophets of Prosperity, 95, 101. 142. Songho Ha, The Rise and Fall of the American System: Nationalism and the Development of the American Economy, 1790–1837 (Pickering & Chatto, 2009), 2–3, 7. 143. William Belko, ‘ ‘‘A Tax on the Many to Enrich a Few’’: Jacksonian Democracy vs the Protective Tariff’ Journal of the History of Economic Thought 37 (2015), 277– 89. 144. James Klotter, Henry Clay. The Man who Would be President (Oxford University Press, 2018), 81. 145. Henry Clay, ‘Speech on the Tariff of 1824’ in F. W. Taussig (ed.), State Papers and Speeches on the Tariff (Harvard University Press, 1892), 254. 146. Clay, ‘Speech of 1824’, 257. 147. Clay, ‘Speech of 1824’, 256. 148. Clay, ‘Speech of 1824’, 277. 149. Clay, ‘Speech of 1824’, 258–9, 266. 150. Clay, ‘Speech of 1824’, 266–7. 151. Klotter, Henry Clay, 81–2; Songho Ha, American System, 3–12. 152. John Van Atta ‘Western Lands and the Political Economy of Henry Clay’s American System, 1819–1832’ Journal of the Early Republic 21 (2001), 635, 649. 153. Irwin, Clashing over Commerce, 155–8. 154. Van Atta, ‘Western Lands’, 663–4. 155. Songho Ha, American System, 3–12; Van Atta, ‘Western Lands’, 633–5, 654. 156. Clay, ‘Speech of 1824’, 303. 157. Van Atta, ‘Western Lands’, 649. 158. Clay, ‘Speech of 1824’, 290; Matson, ‘Capitalizing Hope’, 287–8. 159. Klotter, Henry Clay, 87.

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338 160. 161. 162. 163. 164.

165. 166. 167. 168. 169. 170. 171. 172. 173. 174. 175.

176. 177. 178. 179. 180. 181. 182. 183. 184. 185. 186. 187. 188. 189. 190. 191.

192. 193. 194. 195.

notes to pages 33–7 Irwin, Clashing over Commerce, 25. Van Atta, Western Lands, 644; Klotter, Henry Clay, 87. Irwin, Clashing over Commerce, 145. R. Warren James, ‘The Life and Work of John Rae’ Canadian Journal of Economics and Political Science 17 (1951), 141–8. John Rae, Statement of Some New Principles on the Subject of Political Economy Exposing the Fallacies of the System of Free Trade, and of Some Other Doctrines Maintained in the ‘Wealth of Nations’ (Hilliard, Gay and Co, 1834), xiii. James, John Rae, 149–50. Margaret Hirst, Life of Friedrich List and Selection from His Writings (Smith, Elder & Co., 1909), 7–11. Roman Szporluk, Communism and Nationalism: Karl Marx versus Friedrich List (Oxford University Press, 1988), 102–5. Szporluk, Communism and Nationalism, 105–107; W. O. Henderson, Friedrich List: Economist and Visionary, 1789–1846 (Cass, 1983), 28, 41, 59–61. William Notz, ‘Frederick List in America’ American Economic Review 16 (1926), 251; Henderson, Economist and Visionary, 68. Henderson, Economist and Visionary, 154. Notz, ‘Frederick List’, 253. Friedrich List, Outlines of American Political Economy, in a Series of Letters (Samuel Parker, 1827), 9. Robert Eckert, ‘Der Amerikaaufenthalt Friedrich Lists in seiner Bedeutung für das Listsche System’, Dissertation, University of Erlangen-Nuremberg, 1963. List, Outlines, 5, 6. Keith Tribe, Strategies of Economic Order: German economic discourse, 1750–1950 (Cambridge University Press, 1995), 46–8; Peskin, Manufacturing Revolution, 66, 199. List, Outlines, 7. Tribe, Economic Order, 35; Neill, ‘Daniel Raymond’, 63. List, Outlines, 27–9. Conkin, Prophets of Prosperity, 78–81. List, Outlines, 7, 10. Edwin Seligman Essays in Economics (Macmillan, 1925), 135. List, Outlines, 11, 26. Notz, ‘Frederick List’, 251. Notz, ‘Frederick List’, 261–2. Greenfeld, Spirit of Capitalism, 201. Notz, ‘Frederick List’, 264. Peskin, Manufacturing Revolution, 211. Notz, ‘Frederick List’, 256–7. Henderson, Economist and Visionary, 73. Irwin, Clashing over Commerce, 147–54. Henry Clay, ‘The American System’ in Wendy Wolff (ed.), The Senate 1789–1989 Classic Speeches 1830–1993 (United States Government Printing Office, 1994), 83–4. Songho Ha, American System, 116–18, 123–5. Irwin, Clashing over Commerce, 7; Songho Ha, American System, 132–3. Irwin, Clashing over Commerce, 165–75. Irwin, Clashing over Trade, 176.

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196. Andrew Dawson, ‘Reassessing Henry Carey (1793–1879): The Problems of Writing Political Economy in Nineteenth-Century America’ Journal of American Studies 34 (2000), 470. 197. Dawson, ‘Henry Carey’, 476–8. 198. Stephen Meardon, ‘Henry C. Carey’s “Zone Theory” and American Sectional Conflict’ Journal of the History of Economic Thought 37 (2015), 305, 308, 319. 199. Henry C. Carey, The Harmony of Interests, Agricultural, Manufacturing and Commercial, 2nd ed. (Myron Finch, 1852), 41. 200. Gerald Vaughn, ‘Institutional Economics and Community Development: The Pioneering Roles of Henry C. Carey and Van Buren Denslow’ Journal of Economic Issues XXXVII 2003), 681. 201. A. D. H. Kaplan, Henry Charles Carey: A Study in American Economic Thought (The Johns Hopkins Press, 1931), 27–62. 202. Carey, Harmony of Interests, 58–9. 203. Carey, Harmony of Interests, 60–2. 204. Carey, Harmony of Interests, iii, 4, 51–2. 205. Carey, Harmony of Interests, 43–5, 48. 206. Carey, Harmony of Interests, 49. 207. Carey, Harmony of Interests, 3. 208. Carey, Harmony of Interests, 24, 75. 209. Carey, Harmony of Interests, 47, 86, 87. 210. Carey, Harmony of Interests, 202–9. 211. Carey, Harmony of Interests, 30, 41, 223. 212. Carey, Harmony of Interests, 54, 65–7. 213. Carey, Harmony of Interests, 111. 214. Carey, Harmony of Interests, 98. 215. Henry Carey Baird ‘Carey and Two of His Recent Critics: Eugen v. Boehm-Bawerk and Alfred Marshall’, reprinted from Proceedings of the American Philosophical Society XIXX (1891), 2–9; Kaplan, American Economic Thought, 9–10; Rodney Morrison, ‘Henry C. Carey and American Economic Development’ Transactions of the American Philosophical Society 76 (1986), 79. 216. Paul Krugman, Geography and Trade (MIT Press, 1991). 217. Dawson, ‘Henry Carey’, 465. 218. Kaplan, American Economic Thought, 9–15. 219. Morrison, American Economic Development, 81. 220. Marc-William Palen, The ‘Conspiracy’ of Free Trade: The Anglo-American Struggle over Empire and Economic Globalisation, 1846–1896 (Cambridge University Press, 2017), 11, 33–4; Arthur Lee, ‘Henry C. Carey and the Republican Tariff’ The Pennsylvania Magazine of History and Biography 81 (1957), 280–2; Kaplan, American Economic Thought, 53. 221. Lee, ‘Republican Tariff’, 283. 222. Reinhard H. Luthin, ‘Abraham Lincoln and the Tariff’ American Historical Review 49 (1944), 614. 223. Palen, ‘Conspiracy’ of Free Trade, 36–37; Lee, ‘Republican Tariff’, 293. 224. Lee, Republican Tariff, 295–7. 225. Luthin, Abraham Lincoln, 610. 226. Irwin, Clashing over Commerce, 7, 207–10; Luthin, ‘Abraham Lincoln’, 626–8; Lee, ‘Republican Tariff’, 294; Palen, ‘Conspiracy’ of Free Trade, 11. 227. Morrison, American Economic Development, 82; Luthin, ‘Abraham Lincoln’, 629.

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228. Palen, ‘Conspiracy’ of Free Trade, xxiv. 229. For the ‘civic’ view, see: Liah Greenfeld, Nationalism: Five Roads to Modernity (Harvard University Press, 1993), 397–484. For the alternative: Eric Kaufmann, ‘American Exceptionalism Reconsidered: Anglo-Saxon Ethnogenesis in the ‘Universal’ Nation, 1776-1850’ Journal of American Studies 33 (1999), 437–57; Jasper Trautsch, ‘The origins and nature of American nationalism’ National Identities 18 (2016), 289–312. 230. Shankman, ‘Democratization’, 351. 231. Hamilton, ‘Report on Manufactures’, 980–4; Mathew Carey, Thoughts on the Policy of Encouraging Migration (Philadelphia, 1796), 110–24; Ben-Atar, ‘Hamilton’s Alternative’, 397–8, 407. 232. Phillip Magness, ‘Alexander Hamilton as Immigrant: Musical Mythology Meets Federalist Reality’ The Independent Review 21 (2017), 497–508. 233. Sellers, Market Revolution, 389–91; Steven Taylor, ‘Progressive Nativism: The Know-Nothing Party in Massachusetts’ Historical Journal of Massachusetts 28 (2000), 167–9. 234. Bruce Levine, ‘Conservatism, Nativism, and Slavery: Thomas R. Whitney and the Origins of the Know-Nothing Party’ Journal of American History 88 (2001), 467– 8; Kaufmann, ‘American Exceptionalism’, 456–7. 235. Levine, ‘Know-Nothing Party’, 467, 474–5. 236. Levine, ‘Know-Nothing Party’, 468, 475. 237. Levine, ‘Know-Nothing Party’, 470. 238. Carey, Harmony of Interests, 20; Levine, ‘Know-Nothing Party’, 479. 239. Taylor, ‘Progressive Nativism’, 170–2. 240. Levine, ‘Know-Nothing Party’, 458. 241. Michael Chan ‘Alexander Hamilton on Slavery’ The Review of Politics 66 (2004), 226; Phillip Magness, ‘The American System and the Political Economy of Black Colonization’ Journal of the History of Economic Thought 37 (2015), 189–191. 242. Magness, ‘Black Colonization’, 193. 243. Andrew Shankman, ‘Neither Infinite Wretchedness nor Positive Good: Mathew Carey and Henry Clay on Political Economy and Slavery during the Long 1820s’ in: John Craig Hammond and Matthew Mason (eds.), Contesting Slavery: The Politics of Bondage and Freedom in the New American Nation (University of Virginia Press, 2011), 22, 251, 253. 244. Shankman, ‘Infinite Wretchedness’, 254, 257, 261. 245. Shankman, ‘Infinite Wretchedness’, 254. 246. Shankman, ‘Infinite Wretchedness’, 252; Magness, ‘Black Colonization’, 192; Klotter, Henry Clay, 198. 247. Steele, Thomas Jefferson, 180–15. 248. Magness, ‘Black Colonization’, 189; Klotter, Henry Clay, 199–203. 249. Magness, ‘Black Colonization’, 190–2. 250. Magness, ‘Black Colonization’, 199. 251. Magness, ‘Black Colonization’, 191. 252. Randolph Campbell, ‘The Spanish American Aspect of Henry Clay’s American System’ The Americas 24 (1967), 3. 253. Campbell, ‘Spanish American Aspect’, 8. 254. Campbell, ‘Spanish American Aspect’, 6–7. 255. Clay, ‘Speech of 1824’, 262. 256. Clay, ‘Speech of 1824’, 283.

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Clay, ‘Speech of 1824’, 262. Campbell, ‘Spanish American Aspect’, 8, 13. Campbell, ‘Spanish American Aspect’, 10–11, 14. Henryk Szlajfer Economic Nationalism and Globalization: Lessons from Latin America and Central Europe (Brill, 2012), 197, 202–3. 261. Carey, Harmony of Interests, 135. 262. Campbell, ‘Spanish American Aspect’, 6. 257. 258. 259. 260.

3 The Birth of the National Economy in Europe, 1789–1860 1. Frederick Beiser, Enlightenment, Revolution, and Romanticism (Harvard University Press, 1992), 1–7, 363–5; Eric Helleiner, The Making of National Money (Cornell University Press, 2003), 75–6, 99–120. 2. Eric Helleiner, The Neomercantilists: A Global Intellectual History (Cornell University Press, 2021), ch. 1. 3. Harald Hagemann, ‘German, American and French Influences on List’s Ideas of Economic Development’ in Harald Hagemann, Stephan Seiter and Eugen Wendler (eds.), The Economic Thought of Friedrich List (Routledge, 2019), 58–73; Dieter Senghaas, ‘Friedrich List and the Basic Problems of Modern Development’ Review Fernand Braudel Center (1991), 451–67. 4. Robert Goldstein, Political Repression in 19th Century Europe (Routledge, 2013), ch. 1. 5. Liah Greenfeld, Nationalism: Five Roads to Modernity (Harvard University Press, 1992), 184–5. 6. Jeff Horn, The Path Not Taken: French Industrialization in the Age of Revolution, 1750–1830 (MIT Press, 2006), 7–9. 7. Jean-Laurent Rosenthal, The Fruits of Revolution: Property Rights, Litigation and French Agriculture, 1700–1860 (Cambridge University Press, 1992), 9–20. 8. Rosenthal, Fruits of Revolution, 16. 9. Richard Du Boff, ‘Economic Thought in Revolutionary France, 1789–1792: The Question of Poverty and Unemployment’ French Historical Studies 4 (1966), 434– 51; Istvan Hont, Jealousy of Trade: International Competition and the NationState in Historical Perspective (Harvard University Press, 2005), 131–4. 10. Du Boff, ‘Revolutionary France’, 450. 11. T. Kemp, ‘Economic and Social Policy in France’ in P. Mathias and S. Pollard (eds.), The Cambridge Economic History of Europe, Vol. VIII (Cambridge University Press, 1989), 701–2, 706. 12. Findlay and O’Rourke, Power and Plenty, 366–7. 13. Horn, Path Not Taken, 211–40; Réka Juhász, ‘Temporary Protection and Technology Adoption: Evidence from the Napoleonic Blockade’ American Economic Review 108 (2018), 3339–76. 14. W. O. Henderson, ‘Friedrich List and the French Protectionists’ Zeitschrift für die gesamte Staatswissenschaft 138 (1982), 262–75. 15. Le Comte de Chaptal, De l’industrie françoise, II (Renouard, 1819), 206–7, 213–14. 16. Chaptal, De l’industrie françoise, 222–4. 17. Horn, Path Not Taken, 169–210. 18. Mathew Carey, Essays on Political Economy; or the most Certain Means of Promoting the Wealth, Power, Resources, and Happiness of Nations (M. Carey, 1822), x, 208, 217–18.

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19. François Crouzet, ‘Wars, Blockade, and Economic Change in Europe, 1792-1815’ The Journal of Economic History 24 (1964), 567–88. 20. J. H. Clapham, The Economic Development of France and Germany, 1815–1914 (Cambridge University Press, 1948), 105. 21. Horn, Path not Taken, 15. 22. W. O. Henderson, ‘Charles Ganilh’s An Inquiry into the Various Systems of Political Economy and Subsequent Writing: English and French Contexts’ Journal of the History of Economic Thought 30 (2008), 511–34. 23. L. F. de Tollenare, Essai Sur Les Entraves Que Le Commerce Éprouve en Europe (Janet et Cotelle, 1820). 24. de Tollenare, Essai, 25–41. 25. Ernst Ladenthin, Zur Entwicklung der Nationaloekonomischen Ansichten Fr. Lists von 1820–1825 (Carl Konegen, 1912), 73–102. 26. Gilbert Faccarello, ‘Bold Ideas. French Liberal Economists and the State: Say to Leroy-Beaulieu’ European Journal of the History of Economic Thought 17 (2010) 719–58. 27. Antoine Picon, Les Saint-Simoniens: Raison, imaginaire et utopie (Belen, 2002), 59–76; Richard Swedberg, ‘Saint-Simon’s Vision of a United Europe’ European Journal of Sociology 35 (1994), 145–69. 28. David Todd, Free Trade and its Enemies in France, 1814–1851 (Cambridge University Press, 2015), 123–54. 29. Todd, Free trade, 2–9. 30. Todd, Free trade, 143–4, 231. 31. Henderson, ‘French Protectionists’, 262–75. 32. Todd, Free trade, 143. 33. Arthur Sommer, ‘Friedrich List und Adam Müller’ Weltwirtschaftliches Archiv 25 (1927), 345–76; List, National System, Book 1, Ch. X. 34. Henderson, ‘French Protectionists’, 262–75. 35. Hirst, Life of List, 62–6, 82–8. 36. The Système Naturel itself was republished almost a century later, when it was (accompanied by a German translation) integrated in volume 4 of List’s collected work by Edgar Salin and Wilhelm von Sonntag: Das Natürliche System der Politischen Ökonomie (Hobbing, 1927). 37. List, Natürliche System, 237. 38. List, Natürliche System, 243. 39. List, Natürliche System, 252. 40. List, Natürliche System, 247–53. 41. List, Natürliche System, 410–515. 42. Hirst, Life of List, 84–5. 43. W. O. Henderson, ‘Friedrich List and the Social Question’ Journal of European Economic History 10 (1981), 697–708; Horn, Path Not Taken, 7–9. 44. Kemp, ‘Economic Policy’, 711–25. 45. Todd, Free Trade, 140. 46. Todd, Free Trade, 4. 47. Eugen Weber, Peasants into Frenchmen: The Modernization of Rural France, 1870– 1914 (Stanford University Press, 1976); Miguel Cabo and Ferdinando Molina, ‘The Long and Winding Road of Nationalization: Eugen Weber’s Peasants into Frenchmen in Modern European history (1976–2006)’ European History Quarterly 39 (2009), 264–86; Horn, Path Not Taken, 249–88.

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48. John Nye, ‘The Myth of Free-Trade Britain and Fortress France: Tariffs and Trade in the Nineteenth Century’ Journal of Economic History 51 (1991), 23–46. 49. Todd, Free Trade, 232–4. 50. Isaiah Berlin, The Roots of Romanticism (Princeton University Press, 1999), 145. 51. Ernest Gellner, Nations and Nationalism (Blackwell, 1983), 40, 58–60; Eric Hobsbawm, Nations and Nationalism since 1780: Programme, Myth and Reality (Cambridge University Press, 1992), 54–63; Miroslav Hroch, Social Preconditions Of National Revival In Europe (Cambridge University Press, 1985) 44–61. 52. Hagen Schulze, The Course of German Nationalism: From Frederick the Great to Bismarck, 1763–1867 (Cambridge University Press, 1991), 43–7; Greenfeld, Five Roads, 293–314 53. Berlin, Romanticism, 46. 54. Berlin, Romanticism, 66–78; Roman Szporluk, Communism and Nationalism: Karl Marx versus Friedrich List (Oxford University Press, 1988), 90–2. 55. Royal J. Schmidt, ‘Cultural Nationalism in Herder’ Journal of the History of Ideas 17 (1956), 407–17 56. Dominic Eggel, Andre Liebich and Deborah Mancini-Griffoli, ‘Was Herder a Nationalist?’ The Review of Politics 69 (2007), 48–78. 57. Keith Tribe, Governing Economy. The Reformation of German Economic Discourse 1750–1840 (Cambridge University Press, 1988), 28–34. 58. Keith Tribe, Strategies of Economic Order: German Economic Discourse, 1750– 1950 (Cambridge University Press, 1995), 17–21. 59. Toni Pierenkemper and Richard Tilly, The German Economy during the Nineteenth Century (Berghahn, 2004), 3–12; David Landes, The Unbound Prometheus: Technological Change and Industrial Development in Western Europe, 1750–1914 (Cambridge University Press, 1969), 124–32; Martin Kitchen, The Political Economy of Germany (McGill-Queen’s University Press, 1978), 9–35. 60. Harold James, ‘Monetary and Fiscal Unification in Nineteenth Century Germany: What Can Kohl Learn from Bismarck’ Princeton University Essays in International Finance 202 (1997), 5–6. 61. Tribe, Governing Economy, 143, 167–74. 62. Kitchen, Political Economy, 9–20, 30–1; Pierenkemper and Tilly, German Economy, 23–33. 63. Kitchen, Political Economy, 11–15, 30–1. 64. Schulze, German Nationalism, 48–55; Greenfeld, Five Roads, 360–3, 371–8. 65. H. S. Reiss, The Political Thought of the German Romantics (Basil Blackwell, 1955), 2–4; Robert Lougee, ‘German Romanticism and Political Thought’ Review of Politics 21 (1959), 643. 66. Reiss, Political Thought, 7–8. 67. Lougee, ‘German Romanticism’, 640–2. 68. Richard Bronk, The Romantic Economist. Imagination in Economics (Cambridge University Press, 2009), 149–54. 69. Hans Freyer, Die Bewertung der Wirtschaft im philosophischen Denken des 19. Jahrhunderts (Olms, [1921] 1966), 127; Bronk, Romantic Economist, 153. 70. Goetz Briefs, ‘The Economic Philosophy of Romanticism’ Journal of the History of Ideas 2 (1941), 279–300; Adam Müller, Versuche einer neuen Theorie des Geldes mit besonderer Rücksicht auf Grossbritannien (Leipzig und Altenburg, 1816), 105–

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notes to pages 56–9 17; Wilhelm Roscher, Geschichte der Nationaloekonomik in Deutschland (Oldenbourg, 1874), 763–4. Adam Müller, Die Elemente der Staatskunst: Oeffentliche Vorlesungen, Winter 1808–1809 zu Dresden. Edited by Jakob Baxa (Gustav Fischer, [1809] 1922), 364. Müller, Elemente, V.1, 383. Müller, Elemente, V.1, 384. Briefs, ‘Economic Philosophy’, 280–1. Briefs, ‘Economic Philosophy’, 284. Gisela von Busse, Die Lehre vom Staat als Organismus: Kritische Untersuchungen zur Staatsphilosophie Adam Müllers (Junker und Duennhaupt, 1928), 148–56. Briefs, ‘Economic Philosophy’, 284. Maximilian Kühtreiber, Adam Mueller und seine Nachwirkungen, Dissertation, University of Vienna, 1935. Günter Oesterle, ‘Juden, Philister und romantische Intellektuelle: Überlegungen zum Antisemitismus in der Romantik‘; Athenäum – Jahrbuch der Friedrich Schlegel-Gesellschaft 2 (1992), 67–8 and FN 32. Müller, Elemente, V. 2, 29–31. Richard Gray, ‘Economic Romanticism: Monetary Nationalism in Johann Gottlieb Fichte and Adam Müller’ Eighteenth-Century Studies 36 (2003), 535–57. Müller, Elemente, V. 2, 29–31; Gray, ‘Monetary Nationalism’, 552; Eric Achermann, Worte und Werte: Geld und Sprache bei Gottfried Wilhelm Leibniz, Johann Hamann und Adam Müller (Niemeyer, 1997), 257–307. Müller, Elemente, V. 2, 29–31, 42–59. Willy Daiber, Adam Müller und Friedrich List: Ihre Stellung in der Überwindung des Individualismus, Dissertation, Friedrich-Wilhelm University of Berlin (1923), 34–83. Briefs, ‘Economic Philosophy’, 285. Roscher, Nationaloekonomik, 770–8; Reiss, ‘Political Thought’, 30–3. Isaac Nakhimovsky, The Closed Commercial State: Perpetual Peace and Commercial Society from Rousseau to Fichte (Princeton University Press, 2011), 1–14. Nakhimovsky, Perpetual Peace, 35–60; Todd, Free Trade, 12. Nakhimovsky, Perpetual Peace, 47. Johann Gottlieb Fichte, The Closed Commercial State, translated by Anthony Curtis Adler (Suny Press, [1800] 2012), 145–6. Fichte, Closed Commercial State, 149–60; Nakhimovsky, Perpetual Peace, 74–83. Fichte, Closed Commercial State, 163. Fichte, Closed Commercial State, 173. Anthony Curtis Adler, ‘Interpretive Essay: Fichte’s Monetary History’ in Fichte, Closed Commercial State, 1–72. Fichte, Closed Commercial State, 169–71. Fichte, Closed Commercial State, 170. Fichte, Closed Commercial State, 173–4; Gray, ‘Monetary Nationalism’, 539–40. Adler, ‘Monetary History’, 3; Nakhimovsky, Perpetual Peace, 2–4. Gray, ‘Monetary Nationalism’, 542. Fichte, Closed Commercial State, 195. Fichte, Closed Commercial State, 198.

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102. Gregory Moore, ‘Introduction’ in Johann Gottlieb Fichte, Addresses to the German Nation, translated by Gregory Moore (Cambridge University Press, 2008), xi–xxxvi; Greenfeld, Five Roads, 360–5. 103. Gray, ‘Monetary Nationalism’, 543. 104. Gregory Moore, ‘Introduction’, xxiv–xxvii; Fichte, Addresses, 183. 105. Fichte, Addresses, 138. 106. Fichte, Addresses, 169–71. 107. Fichte, Addresses, 195. 108. Daiber, Müller und List, 83. 109. Artur Sommer, ‘Friedrich List und Adam Müller’ Weltwirtschaftliches Archiv 25 (1927), 345–76; Daiber, Müller und List, 29–34. 110. Tribe, Economic Order, 46. 111. Briefs, ‘Economic Philosophy’, 297–300. 112. Moore, ‘Introduction’, xviii–xx. 113. Andreas Etges Wirtschaftsnationalismus. USA und Deutschland im Vergleich (1815–1914) (Campus Verlag, 1999), 72–87. 114. Helleiner, Neomercantilists, Ch. 2. 115. Hirst, Life of Friedrich List, 73–81. 116. Keith Tribe, Economic Order, 32; J. G. Backhaus, ‘Friedrich List and the Political Economy of Protective Tariffs’ in S. Todd Lowry (ed.), Perspectives on the Administrative Tradition: From Antiquity to the Twentieth Century (Edward Elgar, 1992), 142–57. 117. Friedrich List, National System of Political Economy, translated by G. A. Matile (J. B. Lippincott, 1856), 77–9, 82. 118. List, National System, 61. 119. List, National System, 61. 120. List, National System, 63. 121. List, National System, 83, 89. 122. List, National System, 93–4, 101. 123. List, National System, 63. 124. List, National System, 72. 125. List, National System, 62, 153. 126. List, National System, 62. 127. List, National System, 79. 128. Leonard Gomes, Foreign Trade and the National Economy: Mercantilist and Classical Perspectives (Macmillan, 1987), 273; Christine Harlen, ‘A Reappraisal of Classical Economic Nationalism and Economic Liberalism’ International Studies Quarterly 43 (1999), 733–44. 129. Matthew Watson, ‘Friedrich List’s Adam Smith Historiography and the Contested Origins of Development Theory’ Third World Quarterly 33 (2012), 459–74; Tribe, Governing Economy, 133–48, 164–8; Eric Helleiner, ‘Economic Nationalism As a Challenge to Economic Liberalism? Lessons from the 19th Century’ International Studies Quarterly 46 (2002), 313. 130. Tribe, Governing Economy, 167. 131. Henderson, Economist and Visionary, 165. 132. Joseph Schumpeter, History of Economic Analysis, edited by Elizabeth Boody Schumpeter (Routledge, [1954] 1986), 479–81. 133. List, National System, 245–7. 134. List, National System, 74.

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135. List, National System, 74. 136. List, National System, 248. 137. List, National System, 263; David Levi-Faur, ‘Friedrich List and the Political Economy of the Nation-State’ Review of International Political Economy 4 (1997), 154–78. 138. List, National System, 263. 139. Friedrich Lenz, Friedrich List’s Staats- und Gesellschaftslehre. Eine Studie zur politischen Soziologie (Luchterhand, 1967). 140. List, National System, 223. 141. List, National System, 120. 142. List, National System, 263. 143. List, National System, 128, 143. 144. List, National System, 304. 145. List, National System, 123. 146. List, National System, 123–5. 147. Schumpeter, Economic Analysis, 479–81; Christopher Winch, ‘Listian Political Economy: Social Capitalism Conceptualised?’ New Political Economy 3, (1998), 301–16. 148. Sai-wing Ho, ‘Distortions in the Trade Policy for Development Debate: A Re-examination of Friedrich List’ Cambridge Journal of Economics 29 (2005), 729–45. 149. List, National System, 214–16. 150. List, National System, 220–1. 151. List, National System, 212–13, 262; Arno Mong Daastøl, ‘Friedrich List: The International Dynamics of Mindpower’ in Erik S. Reinert, Jayati Ghosh and Rainer Kattel (eds.), Handbook of Alternative Theories of Economic Development (Edward Elgar Publishing, 2016), 87–108. 152. List, National System, 211–12. 153. Levi-Faur, ‘Nation-State’, 165. 154. List, National System, 234. 155. List, National System, 282–4, 286, 304–5. 156. List, National System, 219. 157. List, National System, 288. 158. List, National System, 233–4. 159. List, National System, 293. 160. List, National System, 302–3. 161. List, National System, 76; Harlen, ‘Economic Liberalism’, 742. 162. List, National System, 375. 163. Ernst Babel, Der Innere Markt bei List und Bismarck, Dissertation at the Hessische Ludwigs-Universität Giessen (1935), 91–107. 164. List, National System, 228–32. 165. Levi-Faur, ‘Nation-State’, 161–2. 166. List, National System, 256–60. Helleiner, ‘Economic Nationalism’, 311–12 and Backhaus, Protective Tariffs, 143. 167. Henderson, Economist and Visionary, 90–104. Friedrich List, Ueber ein sächsisches Eisenbahnsystem als Grundlage eines allgemeinen deutschen Eisenbahnsystems und insbesondere über die Anlegung einer Eisenbahn von Leipzig nach Dresden (Leipzig, 1833). 168. Babel, Innere Markt, 91–107.

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169. List, National System, 131–7. 170. List, National System, 80. 171. Mehdi Shafaeddin, ‘What did Frederick List Actually Say? Some Clarifications on the Infant Industry Argument’ UNCTAD Discussion Papers 149 (2000), 1–23. 172. List, National System, 414–15; Harlen, ‘Economic Liberalism’, 741–2. 173. Shafaeddin, ‘Infant Industry’, 11–12. 174. Backhaus, ‘Protective Tariffs’, 142–56. 175. Robert Eckert, Der Amerikaaufenthalt Friedrich Lists in seiner Bedeutung für das Listsche System, Disseration, University of Erlangen-Nuremberg (1963), 81–102. 176. List, National System, 385. 177. List, National System, 71–2; Helleiner, ‘Economic Nationalism’, 313–14. 178. List, National System, 79–80. 179. List, National System, 73. 180. List, National System, 201. 181. List, National System, 236. 182. Szporluk, Communism and Nationalism, 140–51. 183. List, National System, 280. 184. Szporluk, Nationalism and Communism, 124–31. 185. Mauro Boianovsky, ‘Friedrich List and the Economic Fate of Tropical Countries’ History of Political Economy 45 (2013), 647–91. 186. List, National System, 75. 187. List, National System, 76. 188. List, National System, 350–2. 189. Ludwig Sevin, ‘Die Entwicklung von Friedrich Lists kolonial- und weltpolitischen Ideen bis zum Plane einer englischen Allianz 1846’ Jahrbuch fuer Gesetzgebung, Verwaltung und Volkswirtschaft im Deutschen Reich 33 (1909), 299–342. 190. List, National System, 351. 191. List, National System, 475. 192. List, National System, 264. 193. Hobsbawm, Nations and Nationalism, 30–2; Szporluk, Nationalism and Communism, 128. 194. List, National System, 474. 195. Onur Ulas Ince, ‘Friedrich List and the Imperial Origins of the National Economy’ New Political Economy 21 (2016), 380–400. 196. List, National System, 77–9. 197. List, National System, 78. 198. Jens-Uwe Guettel, German Expansionism, Imperial Liberalism and the United States, 1776–1945 (Cambridge University Press, 2012), 16, 61–8. 199. Edward Earle, ‘Friedrich List, Forerunner of Pan-Germanism’ The American Scholar 12 (1943), 430–43; Louis Snyder, Roots of German Nationalism (Indiana University Press, 1978), 31–4. 200. Szporluk, Nationalism and Communism, 126–8. 201. Edmund Silberner, The Problem of War in Nineteenth Century Economic Thought (Princeton University Press, 1946), 160–70. 202. Eugen Wendler, Friedrich List: Politische Wirkungsgeschichte eines Vordenkers der europäischen Integration (Oldenbourg Verlag, 1989), 85–92. 203. Bryan Cartledge, The Will to Survive: A History of Hungary (Hurst and Company, 2011), 185.

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204. A. J. Taylor, The Habsburg Monarchy, 1809–1918: A History of the Austrian Empire and Austria-Hungary (Hamish Hamilton, 1948), 52. 205. List, National System, 495–7; Sevin, ‘weltpolitische Ideen’, 299–342. 206. Henderson, Economist and Visionary, 105–16. 207. Robert Horvath, ‘Kossuth’s Views on Economics in his Lectures on National Economy at London University’ Journal of European Economic History 2 (1973), 339–54. 208. Norman Davis, God’s Playground: A History of Poland, Vol. II (Columbia University Press, 2005), 22–36. 209. Jerzy Jedlicki, A Suburb of Europe: Nineteenth-century Polish Approaches to European Civilization (Central European University Press, 1999), 57–8. 210. Maciej Janowski, Polish Liberal Thought before 1918 (Central European University Press, 2004), 29–30; Jedlicki, Suburb of Europe, 58–63. 211. Henryk Szlajfer, Economic Nationalism and Globalization: Lessons from Latin America and Central Europe (Brill, 2012), 199, 217–19; Davis, God’s Playground, 254. 212. Szlajfer, Nationalism and Globalization, 203. 213. Szlajfer, Nationalism and Globalization, 200, 220–1; Thomas David, Nationalisme économique et industrialisation: l’expérience des pays d’Europe de l’Est (1789– 1939) (Librairie Droz, 2009), 56–63. 214. Jedlicki, Europe’s Suburb, 76–86. 215. Thomas David and Elisabeth Spilman, ‘Proto-Economic-Nationalism in the Early Nineteenth Century’ in Helga Schultz and Eduard Kubů (eds.), History and Culture of Economic Nationalism in East Central Europe (BWV, 2006), 89–108.

4 The Globalisation of the Nation, 1861–1913 1. Marc-William Palen, The ‘Conspiracy’ of Free Trade: The Anglo-American Struggle over Empire and Economic Globalisation, 1846–1896 (Cambridge University Press, 2017), 1–32. 2. Paul Bairoch, ‘European Trade Policy, 1815–1914’ in Peter Mathias and Sidney Pollard (eds.), The Cambridge Economic History of Europe, Vol. VIII (Cambridge University Press, 1989); Findlay and O’Rourke, Power and Plenty, 395–402; Ashley Timmer and Jeffrey Williamson, ‘Immigration Policy Prior to the 1930s: Labor Markets, Policy Interactions, and Globalization Backlash’ Population and Development Review 24 (1998), 739–71. 3. Ronald Rogowski, Commerce and Coalitions. How Trade Affects Domestic Political Alignments (Princeton University Press, 1989). 4. Partha Chatterjee, Nationalist Thought and the Colonial World: A Derivative Discourse (Zed Books, 1993), 1–35. 5. Rudolf Jaworski, ‘Between Economic Interests and National-Cultural SelfAssertion’ in: Helga Schultz and Eduard Kubů (eds.), History and Culture of Economic Nationalism in East Central Europe (BWV, 2006), 59–69. 6. Cornelius Torp, The Challenges of Globalization: Economy and Politics in Germany, 1860–1914 (Berghahn Books, 2014), 101–6, 154–66. 7. Palen, ‘Conspiracy’ of Free Trade, 3; Andreas Etges, Wirtschaftsnationalismus: USA und Deutschland im Vergleich (1815–1914) (Campus Verlag, 1999), 114– 22; 253–4; W. O. Henderson, The Zollverein (Frank Cass, 1959), 263–73.

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286. Özveren et al., ‘Unity and Diversity’, 194–211. 287. Üngör and Lohr, ‘Genocide’, 500–22. 288. Uğur Ümit Üngör and Mehmet Polatel, Confiscation and Destruction. The Young Turk Seizure of Armenian Property (Continuum, 2011), 34, 61–3. 289. Pamuk, ‘Ottoman Economy’, 122–13; Buğra, State and Business, 35–9. 290. Taner Akçam, The Young Turks’ Crime Against Humanity. The Armenian Genocide and Ethnic Cleansing in the Ottoman Empire (Princeton University Press, 2012), 341–72. 291. Üngör and Lohr, Genocide, 502. 292. Bedross Der Matossian, ‘The Taboo within the Taboo. The Fate of “Armenian Capital” at the End of the Ottoman Empire’ European Journal of Turkish Studies (2011). 293. Üngör and Polatel, Confiscation and Destruction, 66–7; Üngör and Lohr, ‘Genocide’, 514. 294. Üngör and Polatel, Confiscation and Destruction, 79; Akçam, Armenian Genocide, 362. 295. Üngör and Polatel, Confiscation and Destruction, x.

5 The Nationalist as Saviour, 1914–1945 1. Albert Hirschmann, National Power and the Structure of Foreign Trade (University of California Press, [1945] 1980), xvii, 34; Harold James, The End of Globalization: Lessons from the Great Depression (Harvard University Press, 2002), 25–30. 2. Barry Eichengreen and Douglas Irwin, ‘The Slide to Protectionism in the Great Depression: Who Succumbed and Why?’ Journal of Economic History 70 (2010), 871–97; Nikolaus Wolf, ‘Europe’s Great Depression: Coordination Failure after the First World War’ Oxford Review of Economic Policy 26 (2010), 339–69; Barry Eichengreen, Globalizing Capital: A History of the International Monetary System (Princeton University Press, 2019), ch. 3. 3. Karl Polanyi, The Great Transformation: The Economic Origins of Our Times (Beacon Press, [1944] 2001), 152; Kevin O’Rourke and Jeffrey Williamson, Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy (MIT Press, 1999), 93; James, End of Globalization, 10–25. 4. Andrew Thompson and Gary Magee, Empire and Globalisation: Networks of People, Goods and Capital in the British World, c.1850–1914 (Cambridge University Press, 2010), 22–44. 5. Duncan Bell, The Idea of Greater Britain: Empire and the Future of World Order, 1860–1900 (Princeton University Press, 2007); Mark Lee, ‘The Story of Greater Britain: What Lessons does it Teach?’ National Identities 6 (2004), 123–42. 6. Peter Clarke, ‘Churchill’s Economic Ideas, 1900–1930’ in Robert Blake and Wm. Roger Louis (eds.), Churchill (Oxford University Press, 1994), 79–95; Frank Trentmann, Free Trade Nation (Oxford University Press, 2008), 81–133. 7. Clarke, ‘Churchill’, 87; Eichengreen, Globalizing Capital, 22–55. 8. Clarke, ‘Churchill’, 81, 88; Robert Skidelsky, John Maynard Keynes: The Economist as Saviour 1920–1937 (Macmillan, 1992), 191–207. 9. Trentmann, Free Trade Nation, 1–23; James Ashley Morrison, England’s Cross of Gold: Keynes, Churchill and the Governance of Economic Beliefs (Cornell University Press, 2021), ch. 2.

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37. Alan de Bromhead, Alan Fernihough, Markus Lampe and Kevin O’Rourke, ‘When Britain Turned Inward: The Impact of Interwar British Protection’ American Economic Review 109 (2019), 325–52. 38. Douglas Irwin, Against the Tide: An Intellectual History of Free Trade (Princeton University Press, 1996), 172–9; James Jupp, From White Australia to Woomera: The Story of Australian Immigration (Cambridge University Press, 2002), 6–14; Avner Offer, The First World War: An Agrarian Interpretation (Oxford University Press, 1989), 164–75, 203–4. 39. Felicity Barnes, ‘Lancashire’s “War” with Australia: Rethinking Anglo-Australian Trade and the Cultural Economy of Empire, 1934–36’ Journal of Imperial and Commonwealth History 46 (2018), 707–30. 40. Thackeray, British World, 70. 41. Thackeray, British World, 67, 91; Donald Smiley, ‘Canada and the Quest for a National Policy’ Canadian Journal of Political Science 8 (1975), 40–62; Eric Helleiner, ‘Conservative Economic Nationalism and the National Policy: Rae, Buchanan and Early Canadian Protectionist Thought’ Canadian Journal of Political Science 52 (2019), 521–38. 42. Tim Rooth, ‘Retreat from Globalization: Britain and the Renewal of Imperial Trade between the Two World Wars’ in Lucia Coppolaro and Francine McKenzie (eds.), A Global History of Trade and Conflict Since 1500 (Palgrave, 2013), 105–23; Rooth, British Protectionism, 71–100. 43. Skidelsky, Keynes, xxvii; Eric Helleiner, The Making of National Money (Cornell University Press, 2003) 153; Goswami, ‘End of Empire’, 18. 44. Anna Carabelli and Mario Cedrini, ‘Keynes, the Great Depression, and International Economic Relations’ History of Economic Ideas 22 (2014), 105–35; Donald Markwell, John Maynard Keynes and International Relations (Oxford University Press, 2006), 162–4; Barry Eichengreen, ‘Keynes and Protection’ Journal of Economic History, 44 (1984), 363–73. 45. Helleiner, National Money, 190; Goswami, ‘End of Empire’, 18, 29. 46. For a conflation of these concepts, see: Michael Heilperin, Studies in Economic Nationalism (Libraire Droz, 1960), 97–100. 47. John Maynard Keynes, ‘National Self-Sufficiency’ Studies: An Irish Quarterly Review 22 (1933), 177–93; Mark Nolan, ‘The Original 1933 “National SelfSufficiency” Lecture by John Maynard Keynes’ Research in the History of Economic Thought and Methodology 31 (2013), 1–41. 48. Keynes, ‘National Self-Sufficiency’, 177. 49. Keynes, ‘National Self-Sufficiency’, 183. 50. Skidelsky, Keynes, 476–8. 51. Isaac Nakhimovsky, The Closed Commercial State (Princeton University Press, 2011), 3, 171–3. 52. Keynes, ‘National Self-Sufficiency’, 180. 53. Keynes, ‘National Self-Sufficiency’, 182. 54. Keynes, ‘National Self-Sufficiency’, 181. 55. Keynes, ‘National Self-Sufficiency’, 181. 56. Skidelsky, Keynes, 234–8; Zachary Carter, The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes (Random House, 2020), 156–69. 57. Keynes, ‘National Self-Sufficiency’, 186. 58. Keynes, ‘National Self-Sufficiency’, 187.

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364 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100.

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notes to pages 136–40 Feder, Hochfinanz, 51–2. Feder, Hochfinanz, 78. Feder, Hochfinanz, 22–3, 36–8, 58. Feder, Hochfinanz, 26, 60. Feder, Hochfinanz, 38, 54–7. Barkai, Nazi Economics, 23–5; Janssen, Nationalökonomie, 120. Adolf Hitler, Mein Kampf (Eher-Verlag, 1943 [1925]), 232–3. Hitler, Mein Kampf, 233. Hitler, Mein Kampf, 229. Janssen, Nationalökonomie, 93; Peter Krüger, ‘Zu Hitlers “nationalsozialistischen Wirtschaftserkenntnissen”’ Geschichte und Gesellschaft 6 (1980), 263–82. Hitler, Mein Kampf, 164–71; Barkai, Nazi Economics, 21–3. Janssen, Nationalökonomie, 94, 116–20; Tooze, Wages of Destruction, xxvi, 145; Timothy Snyder, Black Earth: The Holocaust as History and Warning (Tim Duggan, 2015), Introduction. Woodruff Smith, The Ideological Origins of Nazi Imperialism (Oxford University Press, 1989), 3–40. Hitler, Mein Kampf, 143–5. Hitler, Mein Kampf, 151. Hitler, Mein Kampf, 153–64; note that Hitler’s explanation of why export markets are supposed to be contracting is only found in his Second Book, which remained unpublished during his lifetime: Krüger, ‘Wirtschaftserkenntnisse’, 270; Tooze, Wages of Destruction, 3. Hitler, Mein Kampf, 151–2; Evalyn Clark, ‘Adolf Wagner: From National Economist to National Socialist’ Political Science Quarterly 55, (1940), 378–411; Offer, Agrarian Interpretation, 23–78. Hitler, Mein Kampf, 145–51. Hitler, Mein Kampf, 148, 151; Janssen, Nationalökonomie, 127–8; Snyder, Black Earth, ch. 1. Tooze, Wages of Destruction, 9; Krüger, ‘Wirtschaftserkenntnisse’, 280, 467. Hitler, Mein Kampf, 153; Tooze, Wages of Destruction, 10, 166–9. Tooze, Wages of Destruction, 38, 146, 311; Christian Leitz, ‘“Export or Die”: Foreign Trade in the Third Reich’ Australian Journal of Politics and History 48 (2002), 52–64; Krüger, ‘Wirtschaftserkenntnisse’, 269, 279; Claus-Christian Szeijnmann, ‘Nazi Economic Thought and Rhetoric During the Weimar Republic: Capitalism and its Discontents’ Politics, Religion & Ideology 14 (2013), 355–76. Barkai, Nazi Economics, 23. Gottfried Feder, Das Programm der N.S.D.A.P. und seine weltanschaulichen Grundgedanken (Franz Eher, 1935), 16–18. Feder, Programm, 4–6. Feder, Programm, 7–14. Hans Buchner, Grundriss einer nationalsozialistischen Volkswirtschaftstheorie (Eher Verlag, 1930), 20–3, 28–31, 44–5. Buchner, Grundriss, 16–19, 24–6, 32–3, 43. Barkai, Nazi Economics, 40–5. Janssen, Nationalökonomie, 75–8; Lenger, Werner Sombart, 353; Barkai, Nazi Economics, 94–100; Szejnmann, ‘Thought and Rhetoric’, 362–3. Barkai, Nazi Economics, 104, 118, 120; Lenger, Werner Sombart, 361; Szejnmann, ‘Thought and Rhetoric’, 360; Kolb, Weimarer Republik, 12, 149.

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62. Carles Brasó Broggi and Jixia Ge, ‘Planning China’s Future: Liu Guojun’s Conception of China’s Postwar Economic Recovery’ Economic History of Developing Regions 35 (2020), 155–70; Riskin, China’s Political Economy, 127; Morgan, Chinese Economy, sec. 2.4; Dwight Perkins, The Economic Transformation Of China (World Scientific, 2015), Sec. 3.6, 5.2. 63. Perkins, Economic Transformation, sec. 5.2, 5.3; Riskin, China’s Political Economy, 53–65, 81–113, 201–7. 64. Wei Li and Dennis Tao Yang, ‘The Great Leap Forward: Anatomy of a Central Planning Disaster’ Journal of Political Economy 113 (2005), 840–77; Naughton, Chinese Economy, 69–72; Riskin, China’s Political Economy, 83–4, 114–47. 65. Perkins, Economic Transformation, sec 4.1; Riskin, China’s Political Economy, 207–32; Audrey Donnithorne, ‘China’s Cellular Economy: Some Economic Trends since the Cultural Revolution’ China Quarterly 52 (1972), 605–19. 66. Riskin, China’s Political Economy, 201–7, 213–22. 67. Naughton, Chinese Economy, 72–6; Riskin, China’s Political Economy, 148–88. 68. Perkins, Economic Transformation, Sec. 5.4; Vogel, Deng Xiaoping, 13–14; Margaret Pearson, Joint Ventures in the People’s Republic of China: The Control of Foreign Direct Investment under Socialism (Princeton University Press, 1991), 6, 22, 41–6; Andrew Wedeman, From Mao to Market: Rent Seeking, Local Protectionism, and Marketization in China (Cambridge University Press, 2003), 6, 27–9. 69. Baum, Burying Mao, 9–12. 70. George Crane, The Political Economy of China’s Special Economic Zones (Routledge, [1990] 2016), ch. 2; Pearson, Joint Ventures, 51; David Bachman, ‘Differing Visions of China’s Post-Mao Economy: The Ideas of Chen Yun, Deng Xiaoping, and Zhao Ziyang’ Asian Survey 26 (1986), 292–321; Riskin, China’s Political Economy, 257–82; Wei-Wei Zhang, Ideology and Economic Reform under Deng Xiaoping 1978–1993 (Kegan Paul International, 1996), 13–18. 71. Baum, Burying Mao, 50–69; Zhang, Ideology and Reform, 19–26, 52–8; Perkins, Economic Transformation, Sec. 5.4; Naughton, Chinese Economy, 78. 72. Schell and Delury, Wealth and Power, Sec 11.1; Baum, Burying Mao, 29–35; Barry Naughton, ‘Deng Xiaoping: The Economist’ The China Quarterly 135 (1993), 491–514. 73. Schell and Delury, Wealth and Power, Sec. 11.7; Zhang, Ideology and Reform, 19– 26; Maria Hsia Chang, ‘The Thought of Deng Xiaoping’ Communist and PostCommunist Studies 29 (1996), 371–94. 74. Deng Xiaoping, ‘To Build Socialism We Must First Develop the Productive Forces’ (April/May 1980) in Selected Works of Deng Xiaoping, Vol. II (Foreign Language Press, 1995). 75. Chang, ‘Thought’, 382–92; Zhang, Ideology and Reform, 26–8, 160–75; Baum, Burying Mao, 12–14, 218–20. 76. Schell and Delury, Wealth and Power, sec. 11.13. 77. Schell and Delury, Wealth and Power, sec. 11.2, 11.7; Deng Xiaoping, ‘Carry out the Policy of Opening to the Outside World and Learn Advanced Science and Technology from other Countries’ (10 October 1978) and ‘Some Comments on Industrial Development’ (18 August 1975) in Selected Works of Deng Xiaoping, Vol. II (Foreign Language Press, 1995); Vogel, Deng Xiaoping, 294–310; Naughton, ‘The Economist’, 509. 78. Bachman, Differing Visions, 311–20; Pearson, Joint Ventures, 21–3, 106, 146–53.

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123. Andaya and Andaya, History of Malaysia, 216–25; Jesudason, Ethnicity and the Economy, 27–30; Harold Crouch, Government and Society in Malaysia (Cornell University Press, 1996), 198–9. 124. Andaya and Andaya, History of Malaysia, 245; Jesudason, Ethnicity and the Economy, 30–45; John Drabble, An Economic History of Malaysia, c. 1800–1990 (Palgrave, 2000), 107–12. 125. Andaya and Andaya, History of Malaysia, 266–87; Jesudason, Ethnicity and the Economy, 47–56. 126. Khoo Boo Teik, Paradoxes of Mahathirism: An Intellectual Biography of Mahathir Mohamad (Oxford University Press, 1995), 17–25; Andaya and Andaya, History of Malaysia, 302–6. 127. Mahathir bin Mohamad, The Malay Dilemma (Marshall Cavendish, [1970] 2008), 27–33. 128. Mahathir, Malay Dilemma, 33–9. 129. Mahathir, Malay Dilemma, 39. 130. Mahathir, Malay Dilemma, 39–46. 131. Mahathir, Malay Dilemma, 11, 78–83; Khoo, Paradoxes, 32–4. 132. Mahathir, Malay Dilemma, 52–5, 72–8; Khoo, Paradoxes, 33. 133. Mahathir, Malay Dilemma, 74. 134. Mahathir, Malay Dilemma, 72. 135. Mahathir, Malay Dilemma, 222, 64, 140–3. 136. Mahathir, Malay Dilemma, 105–17. 137. Mahathir, Malay Dilemma, 56–63. 138. Mahathir, Malay Dilemma, 63. 139. Khoo, Paradoxes, 34–6; Crouch, Government and Society, 181; Edmund Terence Gomez and K. S. Jomo, Malaysia’s Political Economy: Politics, Patronage and Profits (Cambridge University Press, 1999), 29–33. 140. Crouch, Government and Society, 200–3; Gomez and Jomo, Political Economy, 29–33; Jesudason, Ethnicity and the Economy, 91–2, 135–9. 141. Gomez and Jomo, Political Economy, 49–53. 142. Gomez and Jomo, Political Economy, 117–20. 143. Gomez and Jomo, Political Economy, 29–39; Jesudason, Ethnicity and the Economy, 1–2; Crouch, Government and Society, 211–18. 144. Crouch, Government and Society, 206–10; Jesudason, Ethnicity and the Economy, 147–54; Gomez and Jomo, Political Economy, 44. 145. Jesudason, Ethnicity and the Economy, 132–4; 155–9; Gomez and Jomo, Political Economy, 44–9; Crouch, Government and Society, 208–11; Edmund Terence Gomez, Chinese Business in Malaysia: Accumulation, Ascendance, Accommodation (University of Hawai’i Press, 1999), 88–93, 185. 146. Crouch, Government and Society, 199–203; Jesudason, Ethnicity and the Economy, 180–6; Khoo, Paradoxes, 54–7. 147. Jesudason, Ethnicity and the Economy, 166–80; Gomez and Jomo, Political Economy, 12–20; Paul Lubeck, ‘Malaysian Industrialization, Ethnic Divisions, and the NIC Model: The Limits to Replication’ in Richard Appelbaum and Jeffrey Henderson (eds.), States and Development in the Asian Pacific Rim (Sage Publications, 1992), 176–98. 148. Khoo, Paradoxes, 103–9, 140; Drabble, Economic History, 230–9; Andaya and Andaya, History of Malaysia, 324–7; Gomez and Jomo, Political Economy, 75–7; Mahathir bin Mohamad, Vision 2020 (Prime Minister’s Office of Malaysia, 1991).

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8 Populist Discontents, 2002–2021 1. Cas Mudde and Cristóbal Rovira Kaltwasser, Populism: A Very Short Introduction (Oxford University Press, 2017), 27–32, 39; Carlos De La Torre, ‘Populism Revived: Donald Trump and the Latin American Leftist Populists’ The Americas 75 (2018), 733–53. 2. Dani Rodrik, ‘Populism and the Economics of Globalization’ Journal of International Business Policy 1, no. 1 (2018), 12–33.

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3. Anthea Roberts and Nicolas Lamp, Six Faces of Globalization: Who Wins, Who Loses, and Why it Matters (Harvard University Press, 2021), 167; Charles Gore, ‘The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries’ World Development 28 (2000), 789–804; Seva Gunitsky, ‘Democratic Waves in Historical Perspective’ Perspectives on Politics 16 (2018), 634–51; Joseph Stiglitz, Globalization and Its Discontents (Norton & Company, 2002), 3–22, 40–52. 4. Stiglitz, Globalization, 214–52; Anwar Shaikh, Globalization and the Myths of Free Trade (Routledge, 2007), 1–19; Douglas Irwin, Free Trade under Fire (Princeton University Press, 2020), 292–303. 5. Bret Gustafson, Bolivia in the Age of Gas (Duke University Press, 2020), 1–13. 6. Manuel Funke, Moritz Schularick and Christoph Trebesch, ‘Going to Extremes: Politics after Financial Crises, 1870–2014’ European Economic Review 88 (2016), 227–60; Jan-Otmar Hesse, ‘Financial Crisis and the Recurrence of Economic Nationalism’ Journal of Modern European History 19 (2021), 14–18. 7. Dani Rodrik, ‘Why Does Globalization Fuel Populism? Economics, Culture, and the Rise of Right-Wing Populism’ Annual Review of Economics 13 (2021), 133–70. 8. Richard Baldwin and Eiichi Tomiura, ‘Thinking Ahead About the Trade Impact of COVID-19’ in Richard Baldwin and Beatrice Weder Di Mauro (eds.), Economics in the Time of COVID-19 (CEPR Press, 2020), 59–71; Douglas Irwin, ‘The Pandemic Adds Momentum to the Deglobalization Trend’ Peterson Institute for International Economics, 23 April 2020. 9. Tom Perreault and Gabriela Valdivia, ‘Hydrocarbons, Popular Protest and National Imaginaries: Ecuador and Bolivia in Comparative Context’ Geoforum 41 (2010), 689–99; Natalie Koch and Tom Perreault, ‘Resource Nationalism’ Progress in Human Geography 43(4) (2019), 611–31; John Childs, ‘Geography and Resource Nationalism: A Critical Review and Reframing’ The Extractive Industries and Society 3 (2016), 539–46; Ian Bremmer and Robert Johnston, ‘The Rise and Fall of Resource Nationalism’ Survival 51 (2009), 149–58. 10. Nancy Postero, ‘Morales’s MAS Government: Building Indigenous Popular Hegemony in Bolivia’ Latin American Perspectives 37 (2010), 18–34. 11. Benjamin Kohl and Linda Farthing, ‘Material Constraints to Popular Imaginaries: The Extractive Economy and Resource Nationalism in Bolivia’ Political Geography 31 (2012), 225–35; Maristella Svampa, Neo-Extractivism in Latin America: Socio-Environmental Conflicts, the Territorial Turn, and New Political Narratives (Cambridge University Press, 2019), 5–19. 12. Herbert Klein, A Concise History of Bolivia (Cambridge University Press, 2011), chs. 2–4. 13. Klein, History of Bolivia, chs. 5–7; Nicole Fabricant and Nancy Postero, ‘Sacrificing Indigenous Bodies and Lands: The Political–Economic History of Lowland Bolivia in Light of the Recent TIPNIS Debate’ The Journal of Latin American and Caribbean Anthropology 20 (2015), 452–74. 14. Sven Harten, The Rise of Evo Morales and the MAS (Bloomsbury Publishing, 2011), 15–23; Linda Farthing and Benjamin Kohl, Evo’s Bolivia: Continuity and Change (University of Texas Press, 2014), 27; Klein, History of Bolivia, ch. 8; Dwight Heath, ‘New Patrons for Old: Changing Patron-Client Relationships in the Bolivian Yungas’ Ethnology 12 (1973), 75–98. 15. Harten, Evo Morales, 45–6; Álvaro García Linera, ‘Indianismo y Marxismo. El desencuentro de dos razones’ in Pablo Stefanoni (ed.), La potencia plebeya: acción

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175. Eric Helleiner, ‘Varieties of American Neomercantilism: From the First Years of the Republic to Trumpian Economic Nationalism’ European Review of International Studies 6 (2019), 7–29. 176. Robert Kuttner, ‘White Nationalism and Economic Nationalism’ The American Prospect (Fall 2017), 30–3; Marcus Noland, ‘Protectionism under Trump: The China Shock, Intolerance, and the “First White President”’ Peterson Institute for International Economics Working Paper 19–10 (2019). 177. Maurice Obstfeld, ‘Globalization and nationalism: Retrospect and prospect’ Contemporary Economic Policy 39 (2021), 675–90; Adriano Cozzolino, ‘Trumpism As Nationalist Neoliberalism: A Critical Enquiry into Donald Trump’s Political Economy’ Interdisciplinary Political Studies 4 (2018), 47–73. 178. James Baker, ‘America in Asia: Emerging Architecture for a Pacific Community’Foreign Affairs 70 (1990), 1–18. 179. Tom Wraight, ‘From Reagan to Trump: The Origins of US Neoliberal Protectionism’ The Political Quarterly 90 (2019), 735–42; Douglas Irwin, Clashing over Commerce: A History of US Trade Policy (University of Chicago Press, 2017), 565–624. 180. Paul Krugman, ‘Competitiveness: A Dangerous Obsession’ Foreign Affairs 73 (1994), 28–44; Paul Krugman, ‘Proving My Point’ Foreign Affairs 73.4 (1994), 198–203; Christine Oughton, ‘Competitiveness Policy in the 1990s’ The Economic Journal 107 (1997), 1486–503; Irwin, Clashing over Commerce, 567; Tom Wraight, Confronting the Developmental State: American Trade Policy in the Neoliberal Era, Copenhagen Business School PhD Series No. 30 (2021), 105–56. 181. Clyde Preston, Trading Places: How We Allowed Japan to Take the Lead (Basic Books, 1988), 3–26, 122–58. 182. Dana Frank, Buy American: The Untold Story of Economic Nationalism (Beacon Press, 2000), ch. 9. 183. Jennifer Miller, ‘Let’s Not be Laughed at Anymore: Donald Trump and Japan from the 1980s to the Present’ Journal of American-East Asian Relations 25 (2018), 138–68; Irwin, Clashing over Commerce, 565, 570–2. 184. Tim Alberta ‘The Ideas Made It, But I Didn’t’, POLITICO (May/June 2017); Eric Helleiner, ‘The Diversity of Economic Nationalism’ New Political Economy 26 (2021), 229–38. 185. Patrick J. Buchanan, The Great Betrayal: How American Sovereignty and Social Justice are Being Sacrificed to the Gods of the Global Economy (Little, Brown and Company, 1998), 8–11. 186. Buchanan, Great Betrayal, 63–5, 108–13, 156–73. 187. Buchanan, Great Betrayal, 54, 97–100. 188. Buchanan, Great Betrayal, 102. 189. Buchanan, Great Betrayal, 6–7, 62. 190. Buchanan, Great Betrayal, 8–11, 68. 191. Buchanan, Great Betrayal, 6–7. 192. Buchanan, Great Betrayal, 52–4; Tom Wraight, ‘Making America Great (the First Time): US Economic Nationalism in Historical Perspective’ Nations and Nationalism 28 (2021). 193. Alberta, The Ideas Made It. 194. Buchanan, Great Betrayal, 288–9. 195. Buchanan, Great Betrayal, 5. 196. Buchanan, Great Betrayal, 15–16, 274.

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notes to pages 313–7

197. Irwin, Clashing over Commerce, 625–44. 198. The Economist, ‘The Great Hollowing-Out Myth’, 19 February 2004; Jagdish Bhagwati, Arvind Panagariya and T. N. Srinivasan, ‘The Muddles over Outsourcing’ Journal of Economic Perspectives 18 (2004), 93–114. 199. Robert B. Reich, The Work of Nations: Preparing Ourselves for 21st-Century Capitalism (Vintage Books, 1992), ch. 25; David Levi-Faur, ‘Economic Nationalism: From Friedrich List to Robert Reich’ Review of International Studies 23 (1997), 359–70. 200. Reich, Work of Nations, ch. 1. 201. Reich, Work of Nations, Introduction. 202. Reich, Work of Nations, chs. 14, 17, 23. 203. Roberts and Lamp, Six Faces, 14, 22, 116, 191–202; Robert Reich, ‘Elizabeth Warren’s Economic Nationalism Vision Shows There’s a Better Way’ The Guardian, 9 June 2019. 204. Buchanan, Great Betrayal, 97–100, 261; M. J. Lee, ‘Donald Trump’s New Target: Bernie Sanders Supporters’, CNN Politics, 29 April 2016. 205. Irwin, Clashing over Commerce, 632, 640, 676–85. 206. David Autor, David Dorn and Gordon Hanson ‘The China Syndrome: Local Labor Market Effects of Import Competition in the United States’ American Economic Review 103, (2013), 2121–68; David Autor et al., ‘Importing Political Polarization’ American Economic Review 110 (2020), 3139–83. 207. Peter Navarro and Greg Autry, Death By China: Confronting the Dragon – A Call to Action for the Western World (Pearson Education, 2011), 29–45, 49–66. 208. Melissa Chan, ‘Trump’s Top China Expert Isn’t a China Expert’, Foreign Policy, 13 March 2017. 209. Bart Bonikowski and Paul DiMaggio, ‘Varieties of American Popular Nationalism’ American Sociological Review 81 (2016), 949–980; Ashley Jardina, White Identity Politics (Cambridge University Press, 2019), 216–27, 228–36; Pippa Norris and Ronald Inglehart, Cultural Backlash: Trump, Brexit, and Authoritarian Populism (Cambridge University Press, 2019), 331–8. 210. Joshua Green, Devil’s Bargain: Steve Bannon, Donald Trump, and the Nationalist Uprising (Penguin Books, 2018), Preface, chs. 1, 2, 10; Michael Bender, ‘Steve Bannon and the Making of an Economic Nationalist’, Wall Street Journal, 14 March 2017; Helleiner, ‘American Neomercantilism’, 21. 211. Green, Devil’s Bargain, ch. 2; Peter Evans, ‘Behind Trump’s Rhetoric of Economic Nationalism’, Global Dialogue 7(4) (2017); Norris and Inglehart, Cultural Backlash, 338–63. 212. Eric Bradner, ‘Bannon Rejects White Nationalism: “I’m an Economic Nationalist”’, CNN Politics, 21 November 2016; Robert Kuttner, ‘Steve Bannon, Unrepentant’, The American Prospect, 16 August 2017; Eric Levitz, ‘Steve Bannon’s Nationalism Isn’t About the Economy, Stupid’, The Intelligencer, 11 September 2017. 213. Donald J. Trump, ‘Declaring American Economic Independence’, Monessen, Pennsylvania, 28 June 2016; Helleiner, American Neomercantilism, 11. 214. Libby Nelson, ‘Read Donald Trump’s Bizarre, Frightening Speech Responding to Sexual Assault Allegations’, Vox.com, 13 October 2016. 215. Trump, ‘Economic Independence’; Jim Tankersley, ‘Hillary Clinton Has a Very Detailed Plan for the Economy: That May Be a Problem’, Washington Post, 30 July 2016; Michael Memoli, ‘Hillary Clinton Once Called TPP the “Gold Standard”:

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notes to pages 317–20

216. 217. 218. 219. 220. 221. 222. 223. 224. 225.

226.

227.

228.

229. 230.

231. 232. 233. 234. 235.

236. 237. 238.

407

Here’s Why, and What She Says About the Trade Deal Now’ Los Angeles Times, 26 September 2016. Nelson, ‘Trump’s Speech’. Rich Lowry, The Case for Nationalism: How It Made Us Powerful, United, and Free (Broadside Books, 2019), Introduction, ch. 10. Trump, ‘Economic Independence’. Lowry, Case for Nationalism, ch. 10. Trump, ‘Economic Independence’. Green, Devil’s Bargain, ch. 10. Lowry, Case for Nationalism, ch. 7. Trump, ‘Economic Independence’; Helleiner, ‘American Neomercantilism’, 11. Trump, ‘Economic Independence’; George Borjas, ‘Yes, Immigration hurts American Workers’, POLITICO, September/October 2016. Donald J. Trump ‘Here’s Donald Trump’s Presidential Announcement Speech’ Time Magazine 16 (2015); Daniel Béland, ‘Right-Wing Populism and the Politics of Insecurity: How President Trump Frames Migrants As Collective Threats’ Political Studies Review 18(2) (2020), 162–77. Trump, ‘Presidential Announcement Speech’; Philip Martin, ‘Election of Donald Trump and Migration’ Migration Letters 14 (2017), 161–71; Lowry, Case for Nationalism, ch. 11. Trump, ‘Economic Independence’; Buchanan, Great Betrayal, 206–35, 289; Bonikowski and DiMaggio, ‘Popular Nationalism’, 649–980; Stephen Moore and Arthur Laffer, Trumponomics: Inside the America First Plan to Revive Our Economy (St. Martin’s Press, 2018), Introduction, ch. 1; Miller, ‘Trump and Japan’, 148. Moore and Laffer, Trumponomics, ch. 6; Evans, ‘Trump’s Rhetoric’; Pablo Fajgelbaum et al., ‘The Return to Protectionism’ Quarterly Journal of Economics 135 (2020), 1–55. Michael Wolff, Fire and Fury: Inside the Trump White House (Hachette UK, 2018). Philip Martin, ‘President Trump and Migration at 3’ Migration Letters 17 (2020), 191–200; Sarah Pierce, ‘Immigration-Related Policy Changes in the First Two Years of the Trump Administration’ Migration Policy Institute (May 2019). Jeanna Smialek and Zolan Kanno-Youngs, ‘Why a Top Trump Aide Said “We Are Desperate” for More Immigrants’ New York Times, 27 February 2020. Moore and Laffer, Trumponomics, ch. 4. Smialek and Kanno-Youngs, ‘Trump Aide’. Shoba Wadhia, Banned: Immigration Enforcement in the Time of Trump (New York University Press, 2019), chs. 1,2. Jason Hoffman, ‘Trump Extends Immigration Restrictions, Citing Pandemic’s Impact on Labor Market’, CNN Politics, 1 January 2021; Michael Shear, Zolan Kanno-Youngs and Caitlin Dickerson, ‘Trump Halts New Green Cards, But Backs Off Broader Immigration Ban’ New York Times, 21 April 2020; Danilo Zak, ‘Immigration-Related Executive Actions During the COVID-19 Pandemic’, National Immigration Forum, 18 November 2020. Moore and Laffer, Trumponomics, ch. 9. Mary Amiti, Stephen Redding and David Weinstein,‘The Impact of the 2018 Tariffs on Prices and Welfare’ Journal of Economic Perspectives 33 (2019), 187–210. Chad Bown and Melina Kolb, ‘Trump’s Trade War Timeline: An Up-to-Date Guide’, Peterson Institute for International Economics, 31 October 2021; Roberts and Lamp, Six Faces, 113, 338–63.

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notes to pages 321–7

239. Keith Johnson and Robbie Gramer, ‘The Great Decoupling’, Foreign Policy, 14 May 2020; Miller, ‘Trump and Japan’, 142, 151. 240. United States Department of Defense, Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States (September 2018); Matthew Baltz, ‘“Americanism Not Globalism Will Be Our Credo!”: An Analysis of the Economic Nationalism(s) of Trump’s Administration and an Agenda for Further Research’ Nations and Nationalism 27 (2021), 797–815. 241. United States Geological Survey, ‘Investigation of U.S. Foreign Reliance on Critical Minerals’ Open-File Report 1127, 7 December 2020. 242. Calvin Coker and Joel Reed, ‘“This Is a Patriotism Check”: Political Economy, Corruption, and Duty to America in the 2020 Primary Debates’ Argumentation and Advocacy 57 (2021), 200–17; Sheelah Kolhatkar, ‘Can Elizabeth Warren Win It All?’, The New Yorker, 14 June 2019; Heather Gautney, Crashing the Party: From the Bernie Sanders Campaign to a Progressive Movement (Verso Books, 2018), ch. 1. 243. Elizabeth Warren, ‘End Wall Street’s Stranglehold on Our Economy’ Medium .com, 18 July 2019. 244. Elizabeth Warren, ‘Defend & Create American Jobs’ Medium.com, 4 June 2019. 245. Warren, ‘American Jobs’. 246. Elizabeth Warren, ‘A New Approach to Trade’ Medium.com, 29 July 2019. 247. Joseph Biden, ‘The Biden-Harris Plan to Fight for Workers by Delivering on Buy America and Make It in America’, joebiden.com; Noam Scheiber, ‘The Biden Team Wants to Transform the Economy. Really’ The New York Times Magazine, 11 February 2021. 248. Joseph Biden, ‘The Biden Plan to Rebuild U.S. Supply Chains and Ensure the U.S. Does not Face Future Shortages of Critical Equipment’, joebiden.com; Joseph Biden, ‘The Biden Plan to Ensure the Future is “Made in all of America” by all of America’s Workers’, joebiden.com. 249. Jeffrey Kucik and Rajan Menon, ‘Can the United States Really Decouple From China?’ Foreign Policy, 11 January 2022; ‘Biden’s New China Doctrine’, The Economist, 17 July 2021; Chad Bown and Kadee Russ, ‘Biden and Europe Remove Trump’s Steel and Aluminium Tariffs, But It’s Not Free Trade’ Peterson Institute for International Economics, 11 November 2021; ‘President Joe Biden Signs an Executive Order to Buy American’, The Economist, 26 January 2021.

9 Conclusion and Outlook: Explaining Economic Nationalism 1. Facundo Alvaredo, Lucas Chancel, Thomas Piketty, Emmanuel Saez and Gabriel Zucman, ‘Global Inequality Dynamics: New Findings from WID.world’ American Economic Review Papers & Proceedings 107 (2017), 404–9; Branko Milanovic, Global inequality: A New Approach for the Age of Globalisation (Harvard University Press, 2016), 10–45. 2. Thomas Piketty, Capital and Ideology (Harvard University Press, 2020), 862–965. 3. Branko Milanovic and John Roemer, ‘Interaction of Global and National Income Inequalities’ Journal of Globalization and Development 7 (2016), 109–15. 4. Edward White and Mark Wembridge, ‘Xi Jinping Defends Crackdowns in “Common Prosperity” Drive at Davos’, Financial Times, 17 Janaury 2022;

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notes to pages 327–8

5.

6.

7. 8.

9.

409

Feng Zhang, ‘The Xi Jinping Doctrine of China’s International Relations’ Asia Policy 14 (2019), 7–24. Brandon Boylan, ‘In Pursuit of Independence: The Political Economy of Catalonia’s Secessionist Movement’ Nations and Nationalism 21 (2015), 761–85; Piketty, Capital and Ideology, 877; Emmanuel Dalle Mulle, The Nationalism of the Rich: Discourses and Strategies of Separatist Parties in Catalonia, Flanders, Northern Italy and Scotland (Routledge, 2017). Hagan Sibiri, ‘The Emerging Phenomenon of Anti-Chinese Populism in Africa: Evidence from Zambia, Zimbabwe and Ghana’ Insight on Africa 13 (2021), 7–27; Rodney Muhumuza. ‘Hundreds Protest in Uganda Capital Against Chinese Traders’, Associated Press, 19 April 2017; Japhace Poncian, ‘Resource Nationalism and Community Engagement in Extractive Resource Governance: Insights from Tanzania’ Review of African Political Economy (2021), 1–23; Darin Christensen, ‘Concession Stands: How Mining Investments Incite Protest in Africa’ International Organization 73 (2019), 65–101. Dongshu Liu and Li Shao, ‘Public Opinion Backlash Against China’s International Expansion’ Journal of Contemporary China (2021), 1–17. Boris Gehlen, Christian Marx and Alfred Reckendrees, ‘Ambivalences of Nationality- Economic Nationalism, Nationality of the Company, Nationalism As Strategy: An Introduction’ Journal of Modern European History 18 (2020), 16–27. Melissa Aronczyk, Branding the Nation: The Global Business of National Identity (Oxford University Press, 2013), 10, 15–33; David Edgerton, ‘The Contradictions of Techno-Nationalism and Techno-Globalism: A Historical Perspective’ New Global Studies 1 (2007), 1–32.

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INDEX

Aatmanirbhar Bharat, 307 Abdülhamid II, 107 Adenauer, Konrad, 283 agrarianism Bolivia, 280 Brazil, 176 France, 46 Germany, 60, 87, 138 Italy, 168 Palestine, 147 Poland, 75 Russia, 116 United States, 16 agricultural crisis, 325 Argentina, 185 Brazil, 176 East-Central Europe, 78, 88, 92 Egypt, 185 Germany, 81 Ireland, 102 Malaysia, 264 Ottoman Empire, 107 Poland, 74 Romania, 91 aid, 195, 200, 203, 206, 207, 212, 237 Airbus, 285 Akamatsu Kaname, 213 Alamán, Lucas, 43 Alien and Sedition Acts, 41 Aliyah, 144, 150 All-American Harrisburg Convention of Manufacturers, 36 All-German Business Association, 34 Alternative for Germany, 282, 289, 292, 294 American Colonization Society, 42 American Museum, 18, 26

American Party, 41 American Revolutionary War, 15 American School, 40, 97 American System, 40, 43, 84, 129 Amery, Leo, 122, 126–8, 147 Ancien Régime, 46 Anglo-French Commercial Treaty (1786), 46 antisemitism, 56, 57, 88, 92, 112, 122, 132–43, 171, 174, 266 Arab Revolt (Palestine), 151 Argentina, 182–94 Arias, Gino, 168 Armenian genocide, 119 Articles of Confederation, 15 Arusha Declaration, 203–5 Asian financial crisis, 266, 267, 299 Atatürk, Kemal, 108 August Coup, 230 Aurelian, Petre, 91 austerity, 132, 168, 269, 275, 279, 282, 288, 289, 290 Australia, 98, 123, 127, 129 Austro-Hungarian Empire, 73, 78, 88, 94, 143 autarky, 58, 139, 168, 173, 208, 232, 242 autocracy. See dictatorship Aymara, 272, 273, 275 Azevedo Amaral, Antônio de, 178 balanced economy, 17, 38, 81, 83, 103 Balfour Declaration, 147 Balkan Wars, 119 Bank Misr, 188, 193 Bank of North America, 16 Bank of the United States, 21, 26, 27, 36 Bank Polski, 74

410

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index banking union, 289 Bannon, Steve, 1, 308, 315, 316, 318 Bastiat, Frédéric, 49 Battle of the Lira, 168 Beijing Consensus, 267, 299 Belarus, 232 Belt and Road Initiative, 298, 303, 304 Ben-Gurion, David, 148, 150 Ben-Zvi, Yitzhak, 145 Berlusconi, Silvio, 288 Bernhard, Ludwig, 89, 90 Bharat Mata, 103 Bharatiya Janata Party, 306 Biden, Joseph, 309, 322 bilateralism (trade policy), 82, 192 Bismarck, Otto von, 80, 81, 117 blockades. See sanctions Bohemia. See Czech lands Bolivia, 270–81 Bonaparte, Napoleon, 47 Boxer Rebellion, 154 boycotts, 88 Bohemia, 92 Britain, 129 China, 156 Egypt, 188 Germany, 141 Ghana, 198 Hungary, 73 India, 103, 307 Ireland, 18, 102 Malaya, 255 Ottoman Empire, 114, 119 United States, 14, 310 Brazil, 175–9 Bretton Woods Conference, 130, 180 Brexit, 270, 281, 291 Brit Shalom, 149 Britain, 123–32, 282, 287, 290 admiration for, 71 opposition to, 18, 28, 35, 37, 49, 55, 64, 83, 99, 187, 191 Bruce, Stanley, 127 Buchanan, Patrick, 308, 311 Buchner, Hans, 139 Bunge, Alejandro, 187 Bush, George H.W., 310 Bush, George W., 314 Butt, Isaac, 99

411

cameralistic school, 54 Cameron, David, 287, 290 Canada, 33, 123, 129 capital accumulation. See industrial investments capital controls, 105, 121, 130, 142, 178, 192, 201, 210, 266 capital outflows, 58, 121, 124, 127, 142, 221, 263, 266 Carey, Henry, 13, 42, 43, 50, 51, 81, 83, 95, 109, 129, 133, 170, 185, 312 Carey, Mathew, 13, 18, 26, 28, 33, 41, 42, 48 caste system, 98 Cauwès, Paul, 83 centralisation fiscal, 16, 20, 228, 290, 296 planning, 49, 59, 64, 122, 162, 196, 227, 240 political, 19, 32, 108, 159 rural, 38, 205 Chaco War, 272, 275 chaebols, 211, 215, 219 Chamberlain, Joseph, 125 Chamberlain, Neville, 128 Chang, Ha-Joon, 299 Chaptal, Jean-Antoine, 44, 47 Chen Yun, 246, 248, 252 Chiang Kai-shek, 152, 159–62, 211, 241 China, 151–63, 211, 238–58, 270, 293, 296–307, 314 Chinese Communist Party (CCP), 162, 242, 249, 300 Chinese Exclusion Act, 83, 156 Churchill, Winston, 124 civic nationalism, 40 Civil War (Russia), 118, 227 Civil War (US), 40 classical political economy, 2, 20, 50, 63, 98, 107, 124 Clay, Henry, 13, 31–7, 41, 42–3, 297, 312 Cleveland, Grover, 84 Cliffe Leslie, T.E., 97 Clinton, Bill, 313 Clinton, Hilary, 316, 321 Closed Commercial State, 57 Cobden-Chavalier Treaty, 52 coca growers, 274, 275

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412

index

collectivism, 4, 29, 55, 87, 133, 162, 166, 194, 209, 258 Colonial Development Act, 127 colonialism, 60, 70, 82, 97, 185, 198, 202 commercial war (China), 154, 156, 158 commodity symbolism, 104, 274 Common Agricultural Policy, 284 Common Prosperity, 327 Commonwealth of Independent States, 235, 236 community-building, 5, 16, 21, 32, 39, 88, 90, 94, 104, 115, 117, 148, 169, 202, 276, 297 competition between nationalists, 6, 24, 60, 88, 105, 187, 221, 247, 281 interethnic, 78, 85, 92, 145, 260 internal, 116, 135, 209, 251 international, 78, 84, 86, 109, 124, 138, 218, 250, 264, 310, 313 Compromise of 1867, 89 Conquest of Labour, 145 conservatism, 44, 48, 52, 139, 188, 315 Conservative Party (UK), 126, 287 Constitution (US), 19 Continental Blockade, 47 Cooper, Thomas, 34 cooperatives, 5, 88, 92–4, 98, 117, 118, 146, 197, 255, 263 Corn Laws, 78 coronavirus pandemic, 270, 296, 306, 320, 321 corporatism, 163 Brazil, 178 Germany, 56, 140 Italy, 167, 168 Manoilescu, Mihail, 173 Romania, 174 corruption, 23, 161, 171, 199, 211, 229, 262 cosmopolitan nationalism, 77, 97, 255 Côte d’Ivoire, 199 Coxe, Tench, 17, 22, 23 credit expansion, 16, 32, 93, 98, 110, 189, 215, 304 Crimean War, 106 Cultural Revolution, 242 currency

national, 57, 58, 131, 137, 199, 231, 290 union, 57, 199, 232, 286, 288 Custis, George W. P., 28 Czech lands, 88, 92 D’Azeglio, Massimo, 165 Darwinism, social, 85, 87, 138, 149, 260, 267, 312 De Stefani, Alberto, 167 debt (government) Egypt, 185 Eurozone, 288 Germany, 136 Ghana, 200 India, 101 Ottoman Empire, 114 Poland, 74 Russia, 113 United States, 15, 21 debt (personal), 136, 185, 288, 289 decentralisation, 39, 99, 225, 230, 239, 246, 247, 251, 258 deindustrialisation, 96, 107 Delors, Jacques, 284 democracy, 13, 29, 35, 45, 127, 179, 181, 182, 210, 269 Democratic Party, 83, 313, 321 Democratic-Republican Party, 26 demography, 87, 90, 138, 228, 292 Deng Xiaoping, 224, 238, 242–9, 256, 298 Denmark, 71 Depression (1870s), 81 Depression (1930s), 121, 128, 132, 161, 169, 172 Deutschmark-Nationalismus, 287, 290 developmentalism, 98, 181, 195 diaspora, 3, 144, 155, 196, 212, 247, 267, 302 dictatorship, 5, 118, 140, 163–79, 193, 216, 221 Digital Swadeshi, 307, 328 discrimination, 9 against African Americans, 41, 196 against Africans, 198 against Chinese, 264 against Indians, 105

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index against Irish, 41 against Jews, 141 against Poles, 86 in Austro-Hungarian Empire, 92 division of labour, 22, 38, 51, 54, 67 Dmowski, Roman, 92 Dollfuss, Engelbert, 175 drain theory, 93, 100, 103, 154, 157, 200, 225, 235, 290, 318 Drucki-Lubecki, Ksawery, 74 Du Bois, W.E.B., 87, 197 Dupin, Charles, 44, 50 eastern provinces (German Empire), 85, 88, 89 Economic Commission for Latin America (ECLA), 179, 181, 187 economic geography, 39 economic history Chang, Ha-joon, 299 Dupin, Charles, 50 historicism, 79 List, Friedrich, 51 Ranade, Mahadev Govind, 97 Sombart, Werner, 135 economic nationalism, definition of, 2 Edward III (England), 63, 65 Egypt, 182–94, 214 Egyptianisation, 190, 191 Einaudi, Luigi, 165 elites, 190 Argentina, 184 Bolivia, 272, 280 Egypt, 184 European Union, 285 France, 46, 48, 52 Ghana, 200 United States, 13, 25, 311, 317 embargoes. See sanctions emigration colonial, 70, 127 restrictions, 141, 253, 255 support for, 253, 258 Empire Marketing Board, 128 Empire Settlement Act, 127 employment quotas, 22, 171, 178, 190, 261 Enlightenment (French), 45, 47, 53, 55

413

Enlightenment (German), 58 Enlightenment (Scottish), 47 environmental degradation, 176, 228, 270–81 Estado Novo, 178 estates (political), 56 Estonia, 228, 230, 232 ethnicity conflict, 2, 73, 78, 85, 90, 119, 149 division of labour, 90, 119, 228, 259, 324 homogeneity, 42, 119 multiethnic state, 2, 72, 89, 143, 170, 227, 259 networks, 3, 93, 105, 125, 224, 229, 255, 258 segregation, 42, 91, 93, 99, 136, 149, 263 ethno-cultural nationalism, 40, 53, 59, 292, 308, 315 Eurasian Economic Community, 232 Eurasianism, 236 European Central Bank, 286 European Union, 223, 270, 281–96 Euroscepticism, 285–95 expansion (territorial), 6, 43, 45, 47, 69, 72, 82, 117, 208 expansionist motive, 1, 4, 327 Bolivia, 279 Brazil, 179 China, 152, 244 Egypt, 189 Euroscepticism, 286 Germany, 61, 78 India, 98 Ireland, 99 Japan, 109, 218 Korea, 219 List, Friedrich, 35 Malaysia, 264 Manoilescu, Mihail, 172 Russia, 111, 237 Taiwan, 220 Tanzania, 204 United States, 12 exports dependency, 31, 38, 87, 185, 277 promotion, 43, 82, 98, 99, 109, 112, 127, 212, 214, 216, 246, 252, 303

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414

index

exports (cont.) restrictions, 31, 230, 231, 248, 296, 305 voluntary restraints, 222, 309 expropriation, 120, 142, 192 extraterritoriality, 106, 114, 153 Farage, Nigel, 292 Fascism, 166, 174 Feder, Gottfried, 136, 139, 141, 173, 294 Federalists, 19, 25 fellahin, 145, 149 feudalism, 46, 116 Fichte, Johann Gottlieb, 44, 57–60, 131, 140 financialisation, critique of, 30, 122, 131, 135, 136, 173, 266 First World War, 121, 126, 132, 165 foreign direct investment export processing zones, 155, 217, 245 joint ventures, 113, 189, 218, 244 openess to, 21, 111, 158, 168, 201, 220, 239, 251, 256, 264, 280, 293 regulation, 5, 103, 113, 245, 295, 321 resistance to, 112, 122, 171, 186, 191, 242, 274, 306, 328 role of state, 5, 150, 159, 200, 215, 245, 277 foreign exchange shortage, 141, 173, 207, 212, 214, 216, 243 France, 45–52, 82, 296 opposition to, 55, 60 Franco, Francisco, 174 Franklin, Benjamin, 15 French Revolution, 45, 55 Fukuzawa Yukichi, 109, 251 Furtado, Celso, 179 Gallatin, Albert, 27 Gandhi, Mohandas (Mahatma), 96, 103, 297 Ganilh, Charles, 48 García Linera, Álvaro, 269, 271, 273, 278 Garvey, Marcus, 197 Gas War, 275 Gellner, Ernest, 2 gender, 9, 62, 128, 204

Georgia, 230 German Historical School, 79, 80, 109, 134, 165 German tariff (1879), 81 Germany, 33, 53–5, 78–88, 132–43, 282, 286, 291 territorial expansion, 73 Ghana, 196–201 global financial crisis (2008), 269, 287, 299, 315, 326 Gökalp, Ziya, 108, 119 gold standard, 28, 59, 111, 113, 121, 124, 130, 168 Gorbachev, Mikhail, 230 grassroots activism, 3, 26, 45, 75, 81, 95, 142, 157, 189, 240, 274, 310, 315 Great Leap Forward, 241 Greater Britain, 123, 139 Greeks (in Ottoman Empire), 119 Griffith, Arthur, 95, 99 Guaraní, 273 guilds, 54, 56, 134 Haavara, 142, 150 Habsburg Empire. See AustroHungarian Empire Hamilton, Alexander, 12, 16, 19–25, 41, 48, 64, 296, 312, 317 Hapoel Hatzair, 145 Harb, Tal’at, 188, 193 Harlem Renaissance, 196 Harmony of Interests, 38 Harris Treaty, 106, 108 Helleiner, Eric, 11 Herder, Johann Gottfried, 53 Herzl, Theodor, 143 Hirata Tosuke, 117 Hitler, Adolf, 122, 132, 137–41 Holland (Netherlands), 71 Holocaust, 141 Holy Roman Empire, 53 Hong Kong, 153, 245, 263 Horowitz, David, 150 hostile takeover, 285, 295, 304 Houphouët-Boigny, Félix, 199 Hu Jintao, 300 Hua Guofeng, 242 Huawei, 303 human capital, 299

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index China, 256 List, Friedrich, 66 Müller, Adam, 57 Russia, 111 Hume, David, 7, 20 Hungary, 73, 89, 99, 282, 289 ideal types, 9 ideas coalition building, 7, 32, 81, 295, 316 indigenisation, 115, 153, 195, 202, 246 influence of, 7 international diffusion, 2, 8, 36, 63, 152, 164, 166, 187, 196, 325 legitimacy, 178, 181 normativity, 9 objectivity, 33 popularisation, 96, 103, 156, 249, 275 positionality, 9, 63, 98 validity, 9, 50 identity cultural, 59, 65, 233, 246, 257, 270 economic, 3 linguistic, 53, 57, 71, 234 Ikeda Hayato, 217 immigration exclusion, 9, 86, 113, 129, 151 nativism, 41, 112, 254, 285, 292, 317 openess to, 24, 254, 319 restrictions, 83, 230, 319 support for, 3, 41, 147 Imperial Preference, 105, 128 imperialism, 2, 6, 43, 82, 84, 89, 95, 123, 151, 194, 225, 240, 323 import restrictions fees and dues, 99 internal, 54, 155, 241, 248 licensing, 105, 201, 209 prohibitions and quotas, 52, 192, 234, 294 tariffs, 23, 27, 32, 38, 40, 50, 68, 73, 75, 81, 83, 88, 94, 103, 107, 111, 129, 158, 172, 214, 231, 245, 307, 312, 320 technical standards, 303, 305 Inaugural Lecture (Weber), 85 India, 38, 77, 95–105, 126, 305–7 Indian National Congress, 95, 101, 104 individualism, 10, 55, 115, 131, 134, 166

415

Industrial Bank of Japan, 113 industrial investments, 33, 74, 93, 112, 178, 205, 219, 265, 280, 322 industrial policy China, 155, 161, 251, 253, 270, 296–307 European Union, 284, 295 Euroscepticism, 295 France, 48, 50 Germany, 295 Japan, 210, 213 United States, 313, 321, 322 industrialisation strategies Argentina, 187 Bolivia, 276 Brazil, 178 China, 158 France, 48 Ghana, 201 India, 98 List, Friedrich, 66 Manoilescu, Mihail, 172 Poland, 74 Romania, 91 Russia, 110 United States, 22 industrialisme. See Saint-Simon, Claude-Henri de industrialists, 80, 105, 116, 141, 160, 169, 175, 184, 240, 256 inequality (internal), 2, 6, 11, 29, 37, 44, 52, 89, 164, 184, 202, 241, 247, 261, 275, 312, 313, 324, 326 inequality (international), 2, 11, 51, 69, 77, 106, 163, 172, 182, 195, 212, 239, 264, 323 infant industries, 6, 18, 23, 68, 97, 111, 129, 160, 261 infitah, 194 inflation, 121, 132, 193, 211, 235 infrastructure investment, 27, 30, 32, 48, 51, 52, 73, 97, 108, 158, 278, 297 innovation (technology), 48, 66, 113, 209, 298, 300, 301, 313, 321 intellectual property, 298, 299, 300, 302 interest groups, 7, 32, 49, 54, 77, 78, 84, 128, 156, 165, 171, 178, 186, 309, 319

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416

index

International Financial Control, 114 International Monetary Fund, 200, 223, 266, 269, 273, 278, 288, 289 Ireland, 17, 38, 77, 92, 95–103, 126, 130, 288 Irish Famine, 99 Irish migration, 41, 99, 129, 253 Irish National Land League, 102 Iron Guard, 174 Ishihara Shintarō, 222 isolationist motive, 1, 2, 326 Baltic states, 235 Bolivia, 271 China, 152 East-Central Europe, 94 Euroscepticism, 285 France, 50, 83 Germany, 44, 53, 60, 88 Hitler, Adolf, 137 Hungary, 289 Japan, 108, 208 Keynes, 131 Korea, 211 populism, 183 Romania, 170 Russia, 115, 236 Taiwan, 211 Turkey, 108 Ukraine, 233 United States, 13, 25, 37, 84 Italy, 163–9 Itō Hirobumi, 109 Jackson, Andrew, 31, 36 Japan, 77, 105–18, 155, 160, 206, 208–11, 212, 217, 222, 238, 309 Japan Bashing, 222, 310 Jay Treaty, 25 Jefferson, Thomas, 13, 16, 22, 27 Jiang Zemin, 239, 249–53, 300 Johnson, Boris, 291 joint liability, 93 July Revolution, 49 Kanai Noburu, 117 Kant, Immanuel, 58 Kazakhstan, 232 keiretsu, 213, 218 Kerry, John, 313

Keynes, John Maynard, 7, 122, 123, 130–2 Kibbutz, 148 Kishi Nobusuke, 209, 213, 217 Knies, Karl, 79 Know-Nothing Party. See American Party Korea, 117, 206, 208, 211, 214, 221, 242 Kossuth, Lajos, 73 Kravchuk, Leonid, 233 Kristallnacht, 142 Krugman, Paul, 310 Krysiński, Dominik, 75 Kuchma, Leonid, 234 Kuomintang, 157, 159, 161, 211, 216 Kyrgyzstan, 232 labour Zionism, 145, 150, 194 Laffer, Arthur, 318, 319 laissez-faire, 46, 49 land associations, 90, 146 land rights, 102, 149, 274 Land Wars (Ireland), 102 landlords, 54, 74, 81, 85, 96, 102, 116, 145, 169, 184, 273 Latvia, 234 League of Nations, 161, 172 Lebensraum, 138 Lee Kuan Yew, 258, 266 left-wing nationalism. See progressive nationalism Legalism (China), 153 Lenin, Vladimir, 113, 118, 200, 227, 229 Lewis, Arthur, 196 Li Kuo-ting, 220 Liberal Democratic Party (Japan), 210 liberal economic nationalism, 6, 16, 19, 64, 181, 235, 250 Liberia, 42 Lincoln, Abraham, 13, 40, 312 List, Friedrich, 13, 45, 77, 83, 91, 120, 125, 133 advantages of manufacturing, 66 Argentina, 187 China, 152, 157, 162 colonialism, 70 cultural nationalism, 65 economic history, 62 European Union, 283

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index expansionist motive, 62 German legacy, 79 German unification, 34, 60, 79 hagiography, 80, 140 immigration, 65 imperialism, 72 in France, 51 in Hungary, 73 in the US, 33–6, 310 India, 97 industrial policy, 67 inequality (internal), 51 Ireland, 99 isolationist motive, 67 Italy, 165, 166 Japan, 213 liberty, 62 lobbying, 36, 61 Nationalist Dilemma, 68 Neo-Listianism, 299 novelty, 61 prophetic gifts, 80 race, 65 railways, 61 regional integration, 72 Romania, 171 Romanticism, 60 Smith, Adam, 63 stage theory, 51, 63 style and rhetoric, 62 tariff policy, 68 theory of value, 65, 147 tropical countries, 70 universalism, 70 Lithuania, 234 lobbying, 40, 48, 81, 111, 168, 176, 185, 234, 303 local content requirement, 217, 299, 302, 305 Logan, George, 26 Louis-Philippe of France, 49, 50 Lucke, Bernd, 289 Ma Yinchu, 157 Maastricht Treaty, 286 Macron, Emmanuel, 296 Made in China 2025, 302, 320, 322 Madison, James, 13, 16, 18, 22, 27

417

Mahathir Mohamad, 224, 251, 254, 259–67 Malaysia, 254, 259–67 Manchuria, 160, 208, 209, 215 Manoilescu, Mihail, 122, 164, 171–5, 177, 178 Mao Zedong, 152, 162, 238, 240–2, 253 market access, 72, 82, 257, 293, 304 market size, 6, 19, 43, 45, 58, 72, 78, 84, 123, 201, 283 Marquis de Lafayette, 18, 34 Marx, Karl, 39, 95, 166, 229 McKinley, William, 84 meaningful action (Weber), 8 mechanics (US), 17, 25, 26 Meiji Restoration, 108, 154, 208 Méline tariff, 83 Mendeleev, Dmitri Ivanovich, 111 mercantilism, 10, 58 China, 153 France, 46, 47, 49 Germany, 54 Japan, 116 United States, 14, 17, 19 Meri, Lennart, 232 Merkel, Angela, 291 Mexico, 43, 312, 317 middle classes, 32, 101, 132, 140, 188, 290, 295, 312 Midhat, Ahmed, 107, 114, 115, 118 Mill, John Stuart, 97, 101, 124 Ministry of International Trade and Industry (Japan), 213, 218 minjung, 221 modernity, 3, 44, 133, 136 Modi, Narendra, 305–7 Monnet, Jean, 284 monopoly domestic, 68, 71 exports, 192, 205 foreign exchange, 213 internal, 261 manufacturing, 70, 155 on global prices, 38, 170, 265 Morales, Evo, 269, 270–81 Mōri Hideoto, 209 Morrill Tariff, 40 Morris, Robert, 15

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418

index

Movement towards Socialism (MAS), 275 Müller, Adam, 44, 55–7, 60, 65, 79, 97, 133, 136, 139, 287 Mussolini, Benito, 122, 164, 167, 169 Myrdal, Gunnar, 196 Nakayama Ichirō, 212 Naoroji, Dadabhai, 96, 101, 103 Napoleonic Wars, 26, 54 narodniki, 116, 145 Nasser, Gamal Abdel, 182, 191–4, 268 nation, definition of, 9, 29, 35, 65, 181 national capital, 93, 104, 143, 148 national champions, 214, 224, 238, 251, 295, 298, 300 National Development Plan (Bolivia), 276 National Economy School (Milli İktisat), 107, 119 National Health Service, 291, 292 National Humiliation (China), 156, 239, 252 National Income Doubling Plan, 218, 220 national interest, 29, 48, 61, 64, 74, 147, 172, 209, 262 national labour, 37, 39, 44, 50, 81, 83, 185 national products Britain, 128 China, 7, 156, 160, 258 Germany, 56 India, 104 Korea, 208 Ottoman Empire, 118 Palestine, 151 United States, 26, 28 national security, 4, 20, 35, 47, 64, 151–63, 209, 211, 219, 220, 238, 321 National System of Political Economy, 60, 73, 110 national unity, 37, 45, 117, 195, 204, 247, 267, 312, 314 nationalisation, 171, 183, 191, 204, 277, 281, 289 Nationalist Dilemma, 1, 5, 12, 21, 69, 94, 106, 137, 146, 159, 163, 173,

195, 207, 225, 240, 241, 253, 279, 283, 285, 294, 298, 324 natural boundaries, 58, 71 Navarro, Peter, 314, 320, 321 Navigation Acts, 14 navy, 70, 82, 153 Nazi Party, 132, 169 Nehru, Jawaharlal, 105 neomercantilism, 4 New Economic Policy (Malaysia), 261, 265 New Zealand, 124 Nigeria, 198 Niles, Hezekiah, 33, 43 Nkrumah, Kwame, 194, 196–201 North American Free Trade Agreement, 268, 313, 320 Novalis, 55 Nullification Crisis, 36, 62 Nuri Bey, Menâpirzade Mustafa, 107, 115 Nyerere, Julius, 194, 201–6, 279 Obama, Barrack, 314, 315, 316 offshoring, 312, 313, 321 Opium Wars, 153 Oppenheimer, Franz, 146 Orbán, Viktor, 282, 285, 289, 293 organic work, 75, 91 organicism, 55, 56, 133 Oshima Sadamasu, 109 Ostmarkenverein, 88 Osvadă, Vasile, 91 Ottawa Conference, 129 Ottoman Empire, 77, 120, 144 Outlines of American Political Economy, 34 Overseas Chinese Affairs Office, 257 Palestine, 136, 143–51 Palestinian Arab nationalism, 149 Pan-Africanism, 196–201, 203 Pan-German nationalism, 34, 53, 87 Panic of 1819, 28, 30, 31 Pantaleoni, Maffeo, 166 Park Chung-hee, 214, 219, 252 Parnell, Charles Stewart, 102 pauperism, 32, 39, 46, 49, 79, 104 Peel Commission, 151

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index Pennsylvania Society, 34 Perón, Juan, 182, 188, 191–4, 268 philosemitism, 134 physiocrats, 46 Plyushch, Ivan, 233 Podemos, 288 Poland, 73–5, 85, 88, 90, 99, 287 Polish Partition (1795), 74, 85, 89 political will, 63, 137, 167 populism, 6, 268, 324 Argentina, 183, 191–4 Bolivia, 271, 277 Egypt, 183, 191–4 European Union, 285–95 Korea, 221 United States, 322 poverty alleviation, 10, 243, 261, 280 colonialism, 95 India, 100, 104 Ireland, 99 Prebisch, Raúl, 182, 187, 194 prestige (national), 4, 20, 199, 253, 265, 279 Primakov, Yevgeny, 236 privatisation, 167, 265, 273, 274 produttovismo, 167, 171 progressive nationalism, 46, 282, 288, 313 prohibition on sale, 148, 262 property rights, 21, 29, 30, 41, 46, 48, 102, 134, 240 protectionism (non-nationalist), 10 Protestant Ethic (Weber), 86 Prussia, 54, 90 Prussian Settlement Commission, 90, 146 public goods, 48, 183, 277, 282, 290, 292, 315 public procurement, 98, 99, 100, 262, 266, 303, 304, 322 Putin, Vladimir, 237 Qing dynasty, 153, 155, 255 Quechua, 272, 273 race to the bottom, 39, 49, 85, 313 racism, 42, 85, 135, 141, 198, 236 Radical Party (Argentina), 186 Rae, John, 33, 108

419

Ranade, Mahadev Govind, 95, 98 rationality, 8, 20, 55 Raymond, Daniel, 13, 28–31, 64 Reagan, Ronald, 308, 309 redistribution of income, 30, 166, 183, 191, 271, 280 regional integration, 6, 69, 126, 181, 187, 197, 216, 232, 234, 236, 266, 281–96 Reich, Robert, 313 religion Catholicism, 41, 57, 101 Confucianism, 109, 153, 258 Hinduism, 103 Islam, 115 Judaism, 134 Orthodox Christianity, 116 Protestantism, 86 repatriation (profits), 100, 158, 186 Report on Manufactures, 22 repression (political), 107, 118, 190, 215, 229 Republican Party, 40, 83, 311, 319 resource nationalism, 176, 197, 237, 269, 270–81, 328 retaliation (trade policy), 22, 35, 58, 68, 81, 128, 222, 320, 325 Revolution of 1930 (Brazil), 176 Revolutionary Nationalist Movement, 272 Revolutionary Wars (France), 47 Ricardo, David, 63, 79, 172 Rocco, Alfredo, 166, 168, 173 Romania, 73, 88, 91, 164, 169–75 Romanticism Germany (1800s), 44, 53, 297 Germany (interwar), 132 Keynes, John Maynard, 132 List, Friedrich, 72 Roscher, Wilhelm, 79 Rothschild, Baron Edmond de, 144 Rousseau, Jean-Jacques, 45, 58, 201 Ruppin, Arthur, 87, 146–9 Russia, 75, 77, 88, 92, 105–18, 144, 228, 235–8 Russo-Ukrainian War, 238 Saint-Simon, Claude-Henri de, 49 Salazar, António, 175

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420

index

Sánchez de Lozada, Gonzalo, 273, 275 sanctions, 17, 24, 27, 47, 168, 238 Sanders, Bernie, 321 Satsuma Rebellion, 116 Say, Jean-Baptiste, 49 Schacht, Hjalmar, 140 Schmoller, Gustav, 78, 79, 81, 82, 88, 117, 134, 146, 197 Scholz, Olaf, 296 Schuman, Robert, 283 Schumpeter, Joseph, 213 Science and Technology Parks, 302 self-sufficiency, 27, 31, 94, 96, 130, 147, 161, 192, 204, 297 Sen, Rajanikanta, 103 separatism, 101, 225–31, 327 serfdom, 54, 89, 110, 169 settlements Australia, 129 Canada, 130 List, Friedrich, 70 Palestine, 143–51 Poland, 90 United States, 32 Wagner, Adolph, 88 Weber, Max, 86 Shanghai War, 160 Sidqi, Ismail, 190 Simonsen, Roberto, 176–8 Singapore, 258, 260 Single European Act, 285 Sinn Féin, 95, 99 Sino-Japanese War (First), 154 Sino-Japanese War (Second), 152, 161, 208 Six-Day War, 194 size of nations, 71 Skarbek, Fryderyk, 75 Sked, Alan, 287 slavery, 29, 42, 60, 175 Slavophiles, 115 Smith, Adam, 20, 29, 34, 54, 55, 79, 115, 125, 152 Smithianismus, 54, 63 Smoot-Hawley Tariff, 128 social policy, 50, 79, 110, 117, 188, 285, 288, 294 social unrest, 48, 49, 79, 232

socialism, 5, 11 Africa, 194 Bolivia, 271 China, 162, 240–2, 244 Fichte, Johann Gottlieb, 59 Ghana, 196–201 Italy, 166 Romania, 174 Russia, 112 Soviet Union, 229 Tanzania, 201–6 Zionism, 145 Society for Establishing Useful Manufactures, 23 sociology, 86 Sombart, Werner, 133, 134, 140, 169, 170, 173, 209 South Africa, 124 Southern Tour, 249 Soviet Union, 196, 225–31, 235 Spann, Othmar, 56, 133, 139, 162, 173, 209 Stalin, Joseph, 227 State Bank (Russian Empire), 112 state-owned enterprise, 162, 199, 205, 212, 219, 245, 262, 277, 305 Stein-Hardenberg Reforms, 54 Stiglitz, Joseph, 269 Strasser, Gregor, 139 Streeck, Wolfgang, 282 subsidies, 23, 112, 148, 161, 192, 228, 299, 320 Suez Canal, 190, 191 Sun Yat-sen, 122, 151, 155, 157–9, 207, 211, 216, 239, 245, 255 supply chain decoupling, 270, 296, 306, 320, 322 Surowiecki, Wawrzyniec, 74 Swadeshi, 96, 98, 103, 104, 128, 157, 305 Swadeshi Jagran Manch, 306 swaraj, 101 syndicalists, 166 Syngman Rhee, 211, 214 Syrian Civil War, 291 Syriza, 282, 288 Système Naturel d’économie Politique, 51

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index

421

Taiwan, 163, 206, 208, 211, 216, 220, 221, 239, 242, 245, 253, 256 Tajikistan, 232 Talaat Pasha, 120 Tanzania, 201–6 Tanzimat Reforms, 107 Tariff of Abominations, 36 Tariff Reform League, 125 tax policy, 14, 39, 49, 57, 58, 65, 74, 100, 113, 114, 142, 160, 237, 247, 275, 318, 322 Taylorism, 167, 177 Tea Party, 308, 315, 318 technical standards, 298, 303 technocracy, 146, 161, 163, 167, 171, 209 technology transfer, 24, 48, 109, 113, 215, 237, 242, 244, 298, 300, 303 techno-nationalism, 296–307, 328 textile industry, 96, 104, 213, 245 Thiers, Adolphe, 50, 52 Tiananmen Square Protests, 248 time horizon, 23, 25, 30, 65, 67, 183, 265 Tōjō Hideki, 209 Tokugawa Shogunate, 108 Tollenare, Louis-François de, 48 Torres, Alberto, 175, 271 trade balance, 74, 100, 111, 154, 229, 306, 309, 322 trade war. See retaliation (trade policy) Trans-Pacific Partnership, 314, 317, 320 transport costs, 38 Transylvania, 89, 91, 170 Treaty of Rome, 283 Treaty of Versailles, 132, 156 Trinity College Dublin, 99 Trump, Donald, 1, 268, 293, 322 Turkey, 108

United States of America, 12–43, 83, 106, 222, 252, 302, 322 universal peace Fichte, Johann Gottlieb, 58 List, Friedrich, 68, 72 Müller, Adam, 57 Sun Yat-sen, 159 US-China Trade War, 302, 320 Uzbekistan, 228, 230

Ujamaa, 202–3 UK Independence Party, 282, 287, 290, 292 Ukraine, 228, 229, 232, 233 unemployment, 32, 46, 124, 127, 139, 144, 184, 273, 285, 292, 317 unequal exchange, 23, 67, 229 unequal treaties, 106, 108, 154 United Malays National Organisation, 259

Xenopol, Alexandru, 170 Xi Jinping, 250, 270, 303, 304 Xinhai Revolution, 155, 157, 255

Vargas, Getúlio, 164, 178 Védegylet, 73, 91 Vietnam War, 215 Volk, 53, 88, 133, 139 Wafd Party, 188, 190 Wagner, Adolph, 78, 87, 117, 146, 177, 197 War of 1812, 27 War of the Pacific, 272, 275, 281 Warren, Elizabeth, 309, 314, 321 Washington, George, 25 Water War, 274 wealth and power, 4, 109, 153, 222, 238, 243 Weber, Max, 8, 77, 85–7, 90, 92, 134, 138, 251, 260 Wei Yuan, 153 Wen Jiabao, 301 Whig Party, 36, 41 White Australia Policy, 129 Witte, Sergei Iulievich, 80, 110, 112, 118 working classes, 124, 182, 188, 295, 312 World Bank, 200, 269, 273, 274, 278 World Trade Organisation, 223, 251, 269, 299, 314

Yeltsin, Boris, 230, 236 Yemelyanov, Oleksandr, 232 Young Ottomans, 107 Young Turks, 107, 114, 119 Yrigoyen, Hipólito, 186 Yushin, 219, 221

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422 zaibatsu, 113, 209 Zamindars, 96 Zeletin, Ştefan, 170 Zhao Ziyang, 244, 247, 248 Zheng Guanying, 154–6, 251, 255

index Zhu Rongji, 249, 252, 300 Zionism, 143–51, 198 Zionist Organisation (ZO), 144 Zollverein, 61, 67, 71, 78, 80, 284

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