ECONOMIC NATIONALISM

GROUP 5

Definition: situation in which a country tries to protect its own economy by reducing the number
of imports and investments from other countries
Goal: to enrich and empower the nation to the maximum possible degree
 This is done by instituting policies, such as tariffs, development subsidies, or
infrastructure investment programs, that are designed to create, attract, and retain as
much economic activity as possible within the nation’s borders.
 These policies are usually imposed on an ad hoc basis, according to the needs of the
time—they vary from place to place and region to region, depending on the type of
economy in question.
Example: A country with bad roads would get the most bang for its buck improving its roads,
whereas a country with decent roads may benefit more from improving its airports—it entirely
depends on the local context, there is no one size fits all solution.
Criticism: Consumer preference for local goods gives local producers monopoly power,
affording them the ability to lift prices to extract greater profits. Firms that produce locally
produced goods can charge a premium for that good. Consumers who favor products by local
producers may end up being exploited by profit-maximizing local producers. For example; a
protectionist policy in America placed tariffs on foreign cars, giving local producers (Ford and
GM market) market power that allowed them to raise the price of cars, which negatively affected
American consumers who faced fewer choices and higher prices. Locally produced goods can
attract a premium if consumers show a preference towards it, so firms have an incentive to pass
foreign goods off as local goods if foreign goods have cheaper costs of production than local
goods.