ECONOMIC NATIONALISM AND ECONOMIC CRISIS
The aim of this research is an empirical testing of whether economic nationalism amongst
citizens is affected by a large-scale financial crisis.
Work in Progess
INTRODUCTION
The conventional view of economic nationalism paints it as something of an ‘anachronistic
ideology’ in a globalising world (Pickel 2005:1). It is something that reached its height in the
first half of the twentieth century, but has since been on the wane (Hobsbawn 1995, Barber
1995). This form of nationalism is associated with policies of state-building (Gilpin 1997) and
a protectionist approach to economic strategy: that is the use of tariffs or quotas, or
regulatory standards that purposely protect domestic markets from foreign imports (Reich
1991). Whilst these practices are argued to be on the decline, in times of global or regional
economic crises it is not long before commentators – liberal ones in particular – tend to
complain that economic nationalism either caused the problem, or will rise again as a
damaging ‘knee-jerk’ response to a crisis (Pryke 2013).
Helleiner and Pickel (2005) outline two problems with taking this conventional analytical
approach. Firstly, it sets up protectionist policies as nationalistic and in opposition to
neoliberalism. This muddies the fact the neoliberalism itself can be understood as a form of
economic nationalism (see Hieronymi 1980). Secondly, and my focus in this paper, the
conventional view compounds the ‘nation’ together with the ‘state’; the lens looks at only
the economic, state-level policy, and side-lines important social, historical, political and
cultural factors that determine the concept of nationalism. The response to this has been to
recast nationalism as a ‘generic discursive structure’ and not a ‘substantive doctrine’ of any
kind: in its economic formulation it is context-dependent on each economy and each nation
(Pickel 2003). This is a welcome development in improving the conceptualization of
economic nationalism, but the focus has predominantly remained at the level of the state.
There is a dearth of analysis on how economic nationalism is manifest in the attitudes of
individuals – the citizens themselves –who comprise the largest sector of the ‘imagined
community’ that is the nation (Anderson 1991). Furthermore, we do not know what impact
an economic crisis might have on these attitudes.
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The following study focuses on this issue by using data from five high-income countries and
three waves of the World Values Survey (WVS) – two collected pre-financial crisis and one
afterwards – to explain how economic nationalism manifests itself in the values and
attitudes of citizens, and what impact an economic crisis has on these attitudes.
ECONOMIC NATIONALISM AS STATE POLICY
A large part of the literature on economic nationalism has been influenced by economists,
who present the concept in a straightforward manner as being economic practise and policy
measures that have historically been construed as nationalistic in nature (Baugh & Yaprek,
1996: 760). Johnson (1965: 179) suggests that the main thrust of this process is extending
the property owned by nationals, with property not limited to the physical, but including the
cultural as well as entrepreneurial and institutional (for instance nationalizing the civil
service).
Although this definition is overly simplistic, it allows us to differentiate between the
experiences of European states from the 16th to the 18th century compared to the 19th. As
Greenfield (2001, 107-114) points out, the earlier era is better understood as ‘mercantilism’:
trade and growth between countries driven by individual tradesman usually with support
from the monarchy. Any improvement of affairs for the state was in a sense the by-product,
not the aim, of such actions. It is in the 19th century that the conventional view of economic
nationalism becomes realised through Realist economic policies such as regulatory
standards that purposely protect domestic markets from foreign imports and protectionist
policies such as tariffs or quotas (Reich 1991). Pryke (2012: 285) notes that throughout this
period, “governments in Europe, America and Japan made impatient attempts to force
industrialisation through piecemeal tariff hikes, amid periodic crises and a rising tide of
popular nationalist sentiment”. This economic rivalry, manifested predominantly in
protectionist approaches to economic policy, has been argued to help pave the way for
WW1 (Daunton 2008: 2).
Economic nationalism understood in this way has long been used as a term of abuse by
liberals, on the understanding that it ‘distorts trade and finance relationships and can
impede the efficiency of global resource allocation’ (Baugh & Yaprek, 1996: 760). This sets
up neoliberal ideas of the ‘free-market’ as the antithesis to economic nationalism.
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But is adherence to neoliberal policy not a conscious policy choice, taken by state officials to
further the interest of their nation? A fundamental problem with this conventional view is
that it impedes us from, ‘analysing what happens when politicians chose liberal economic
policies as a selective strategy to further territorial ‘insider’ interest’ (Clift & Woll 2012: 309).
As Crane (1998:55) put it: “‘Economic nationalism’, is, thus, something of a misnomer, as
most conventional treatments focus on the state, not the nation.” This conventional view
then, needs rethinking.
ECONOMIC NATIONALISM AS SOCIAL IDENTITY
In an influential article, Shulman (2000) provides an analytical framework that reintegrates
the ‘nationalism’ part in economic nationalism. If nationalism is ‘the promotion of the
autonomy, unity, and identity of the nation’ then ‘nationalists have strong possible
motivations both for and against close economic ties with foreign nations and states’
(Shulman 2000: 365, emphasis added). Pryke (2013: 283) points out that this important
reconfiguration then allows for a ‘decoupling of economic nationalism and protectionism’,
and this revision of economic nationalism has subsequently informed writings on the topic
since the mid-2000s.
These revisionist writings take a number of directions. One recent development is the
argument that we can move beyond economic nationalism to economic patriotism, which
widens the focus to different geographies, to better understand supra- and sub- national
economic policy (see Clift & Woll 2012 and the Special Issue of Journal of European Public
Policy 2012). However, in this suggestion is the implicit notion that we have exhausted the
usefulness of economic nationalism as term, whereas arguably, the reinvigoration of the
‘national’ part of the term still has considerable potential to offer numerous into this area of
research, beyond that offered by the conventional view. With ‘nationalism’ at the forefront
of the concept, approaches from the research field of social identity have much to offer.
Helleiner and Pickel (2005) have developed the studies of Crane and Shulman by recasting
nationalism as a ‘generic discursive structure’ and not a ‘substantive doctrine’ of any kind.
This brings back the important social, historical, political, cultural, and indeed economic,
factors that inform nationalist attitudes. The concept then is widening considerably from the
conventional Realist understanding discussed above, to one fundamentally concerned with
social identity.
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Indeed, notions of social identity are central in other formulations of nationalism, such as
political, civic and ethnic, yet this field of study has ‘not devoted systematic attention to the
ways in which national identity shapes and effects economic processes’ (Pickel 2005: 4). In
my argument, a piece of this puzzle that remains under-researched is that of economic
nationalism as the individual level. Throughout the edited collection from Helleiner and
Pickel the focus remains consistent on state-level elites, yet is a clear space for social
identity to be more directly linked to economic nationalism through realistic group conflict
theory (RGCT).
RGCT assumes that groups which find themselves locked in a zero-sum contest over
resources will tend to experience a high degree of threat, and that the threat is then likely
to result in stigmatization and development of discriminatory practices and prejudice
expression among the contesting groups (Sherif, 1966; Turner, 1975). This competition
might concern material resources, such as employment or housing opportunities, as well as
less tangible capital such as power, values or social status. The threat of losing vital
resources results in negative attitudes towards competitors. It follows that worsening
economic conditions, leading to higher rates of unemployment, are likely to result in
hostilities between groups which directly compete over jobs and material resources.
Clearly then, the economic crisis of 2008 provides a test bed for looking at how the
economically nationalist attitudes of citizens might be effected by a deteriorating economic
context.
ECONOMIC NATIONALISM AND ECONOMIC CRISIS
Definitions of financial crisis vary across numerous economic indicators (for reviews see
Frankel & Saravelos 2012, Abiad 2003, Hawkins & Klau 2001 and Kaminsky et al. 1998) but
an important initial observation is that, as with the literature on economic nationalism, the
most common indicators and measures used to identify financial crises are state-level: they
make limited or no reference to the consequences these events might have on experiences
of citizens. Indeed, the identification of any kind of financial meltdown is often technical in
nature, and dehumanized in general.
Since the reformulation of economic nationalism as social identity is relatively new, its
relationship with economic crises is linked to that conventional, protectionist, view. Whilst
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policies of economic protectionism were linked to WW1, in 1935, a commentator in the
Columbia Spectator continued this theme by arguing that the rise of economic nationalism
was a product of the Great Depression, as ‘dwindling world trade after 1929’ lead to
‘nationalistic policies…practically forced upon the nations of Europe.’
In later years, commentary that set economic protectionism as being the culprit of crisis can
be found concerning events ranging from post-Soviet development struggles to the Asian
Financial Crisis to struggling EU integration (see Pickel 2003:107-111).
In the heavily integrated but deregulated context of global financial markets in 2008, it is
arguably difficult to point the finger of blame for the crash at this conventional
understanding of economic nationalism. Lewis (2010: 127) notes that there, “is some
consensus about the causes of the economic problems of 2008 and beyond. In a nutshell,
financial institutions lent money they did not have to people who could not pay it back.”
Instead, the most common discourse in this event was not that economic nationalism
caused the crisis, but that it might resurge after the crisis. In 2008, the Labour Party Business
Secretary of the UK warned that: “The danger of this crisis is it may spark a new wave of
economic nationalism, with each country looking for a 'get out of jail free’ card” (Kleinmann
2008). A fortnight later this view was echoed in The New Statesman (October 2008) by the
Liberal Democrat Vince Cable, who then went on to become Business Secretary himself
eighteen moths later. In 2009 The Economist argued that the ‘spectre’ of economic
nationalism may have to be ‘buried again’ (accompanied by a picture of a zombie hand
thrusting up through the ground in a graveyard). In 2012, Roger Zoellick, then president of
the World Bank, warned that the crisis could heighten political pressure for economic
nationalism and increased protectionism in the Eurozone, hurting developing countries in
the process (The Guardian 2012). Clearly then, there was a distinct fear that economic
nationalism would be on the rise after the crisis.
The following sections seek now examines economic nationalism as an aspect of social
identity, and analyses how it reacted to the 2008 economic crisis.
METHODS AND DATA
The data for this study utilises three waves of the World Values Survey (WVS): 1999-2004,
2005-2007 and 2010-2014. Consequently, there are two pre-crisis and one post-crisis time
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periods available. It was decided that, in order to compare the different time periods more
robustly, only countries that are available in all three waves will be examined, instead of
taking an aggregated and non-specific approach. Due to the variability in the WVS selection
of countries and data coverage, only five are available in all three waves: Chile, Spain,
Sweden, USA and Mexico, with a combined available sample size of 19,472. These countries
are all classified as High Income by the OECD accept for Mexico, which is classed as UpperMiddle. The WVS aims to produce representative samples for each country (see wvs.org).
Due to the dependent variable having a binary outcome (see section below) logit regression
models are used. It is increasingly become the convention that coefficients are calculated
and presented as risk-ratios or relative risk (RR), not as odds-ratios, as odds-ratios are
difficult to understand and frequently misinterpreted (see Davies et al. 1998, Schwartz,
Woloshin & Welch 1999, Greenland 2004, Sistrom & Garvan 2004, Norton, Wang & Ai
2004). This study follows this trend. Furthermore, there are numerous ways to calculate r 2
scores for logit models, and no consensus on the most appropriate. This study uses a
relatively new r2 technique: Tjur’s r2, or the ‘coefficient of discrimination’ (see Tjur 2009).
This r2 is chosen for its inherent simplicity; the score is simply the absolute value of a t-test
between the actual values and predicted model values (see Allison 2013 for a discussion).
The countries are equal weighted in the models.
MEASURING ECONOMIC NATIONALISM
A single item is used to examine economic nationalism: “When jobs are scarce, employers
should give priority to [NATION] people over immigrants”. This item strongly reflects the
theoretical concerns of economic nationalism as it explicitly discusses the importance of
nationality in the labour market. The available answers are combined into a binary outcome
variable, with Agree=1, and Disagree and Neither=0. The reason ‘Neither’ is combined here
is that the answer, although sitting on the fence to an extent, still does not prioritise
individuals by their nationality.
As conventional understandings of economic nationalism predicted and warned against
‘knee-jerk’ return to economically nationalist policy, so this prediction also informs the first,
basic hypothesis of the social identity element of economic nationalism:
H1: Levels of economic nationalism will be higher after a crisis, compared to before
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EXPLANATORY VARIABLES
As Johnson (1965: 178) argues, “One would expect to find nationalist sentiment strongest
where the individuals concerned are most vulnerable to competition from foreign culture or
from foreign economic activities”. This also matches up with RGCT expectations, and so
informs the next hypothesis:
H2: The weaker an individual’s economic circumstance, the more likely they are to display
economically nationalistic attitudes
H2.1: An individual’s economic circumstances will have more effect after a crisis
In order to determine an individual’s economic circumstance, three variables are added to
the model: the degree of savings an individual has, their job status, and their self-perceived
level of income.
Furthermore, RGCT would expect that those with stronger in-group orientation would be
more likely to display economically nationalistic tendencies, and so we would expect:
H3: The stronger an individual’s affiliation with the nation, the more likely they are to display
economically nationalistic attitudes
H3.1: An individual’s affiliation with the nation will have more effect after a crisis
In order to determine in-group nationalist affiliation two variables are used: one measures
patriotism through varying amounts of pride in nationality, and the other is a xenophobic
measure, which is whether or not the participant mentioned immigrants as undesirable
neighbours.
The demographic variables of gender, age and education are also added. Previous studies
suggest that discriminatory attitudes are more pronounced among women and older people
(Semyanov et al. 2002; Semyanov et al., 2008).
ANALYSIS AND FINDINGS
Figure 1 shows the impact the crisis had on economic growth in the five countries focused
on in this study, plus lines indicating when the WVS surveys were taken. The crash is clear
throughout 2007-2008, with all five countries experiencing dramatic constrictions of growth,
falling from at least +2% growth to around -4%. In the following four years there are
different degrees of recovery. Chile, Sweden and Mexico initial reach and then exceed preLuke Temple
Crash growth rates. However, both Sweden and Mexico then experience a downward slide
again of around 4 percentages points. Chile fares better with a less acute drop from 6%
growth in 2010 to 4% growth in 2013. The US had a less dramatic growth rise after the crash
but stabilised around 2% growth. Of the five countries, Spain’s recovery proved the weakest,
struggling throughout the post-crash period to register positive growth.
Figure 1: Economic Growth (%) 1997 – 2013
Source: World Bank
This shows that the patterns of economic growth before the crash and during the times that
the surveys were conducted, whilst not identical, are roughly comparable across this
countries. Similarly, the degree to which growth crashed in 2009 is comparable, although
Spain’s experience is somewhat more pronounced. To examine the first hypothesis, Figure 2
shows the percentages of those who prioritise nationals over immigrants for each wave of
the survey. Percentages are shown for the countries selected, plus as a comparison the
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overall amounts for the WVS dataset each year as a whole. All five countries did not feature
in the 1994-1998 wave of the WVS, and so this wave is not comparable.
Figures 2: % who would prioritise a national over an immigrant
n: All Countries = 283,745; Five countries = 19, 472
The first thing to note is that whilst the conventional view on state-level economic
nationalism suggest it has been on the wane for the past six decades, amongst citizens the
idea that nationals should be given priority over immigrants in a difficult job market is
clearly a majority view. The average for the full WVS dataset demonstrates that around 70%
of people have this attitude. In comparison, the five country dataset shows averages around
15-20% less. This difference is likely accounted for by the much smaller range of countries in
the five country selection when it comes to economic development. These five are all
advanced, developed democracies. In comparison, the full WVS range includes many poorer
and developing countries, who are likely to consider themselves more vulnerable
economically in global markets.
In terms of hypothesis 1, there is no expected spike in economic nationalism for either sets
of data. In fact, whilst there are not enough data points to be sure of any long-term trends,
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in the full WVS data there are potentially signs of a slow downward trend over time, from
73% in 1994-1998 to 69% in 2010-2014. For the five country data set, between the first two
data points there is no significant difference, with them both at around 56%, however, there
is a pronounced and significant drop between 2005-2009 wave and the 2010-2014 wave, of
6 percentage points. Again, whilst this is not enough data to be sure of a trend, taken
together, these findings contradict the first hypothesis, that there would be a rise in
attitudes of economic nationalism after the crisis. In fact, there is a suggestion here that
overtime we could be experiencing a general decline in this type of attitude, and no clear
effect of the crisis.
Accordingly then, this study is operating in a context of reduced economic nationalism in the
post-crisis wave. To explore hypotheses 2 and 3, a separate logistic model is run for each
wave of the survey, to assess what explanatory variables help explain economic nationalism,
and whether these are different for different periods of time. Table 1 presents the three
logistic regression models for each wave. In order to simplify the output, the RR and level of
significance are presented. Full details of standard errors can be found in the appendix.
These models also control for which country the respondents are from, and these results
are shown separately in Table 2.
In terms of hypothesis 2 and 2.1 the evidence presented in this study is mixed. It is only
after that crisis that the financial circumstances of an individual have any explanatory effect
on economic nationalism. Then, an important factor is perceived levels of income. Those
who see themselves in the lower income deciles are 1.23 times more likely to have an
economically nationalist attitude compared to those in the top, and those in the middle are
1.19 times more likely compared to the top. These results align strongly with the idea that
the more economically vulnerable an individual, they more likely they are to be nationalistic
in an economic sense.
In terms of employment status, after the crisis part-time workers were 1.16 times more
likely to believe that nations should have priority over immigrants when jobs are scarce.
Compared to full-time work, part-time work is generally seen as more precarious and so this
result matches the prediction and is expected. Yet it is surprising then that there is no effect
of being unemployed. It could be that having some work, but perhaps not enough work,
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actually heightens an individual’s feelings of vulnerability in a job market compared to those
who do not have any.
Table 1: Logistic Regression results (as Risk-Ratios)
1999-2004
RR
2004-2008
RR
2010-2013
RR
15-24 (REF)
22-44
44-64
65+
1.07
1.04
1.11
1.11
1.17***
1.21***
0.96
1.01
1.05
Male (REF)
Female
0.97
1.00
1.08***
Some Higher (REF)
Some Further
Some Secondary
Some Primary
1.10
1.15***
1.22***
1.10
1.11
1.11
1.10
1.09
1.17***
High Income (REF)
Middle Income
Low Income
1.00
1.03
1.00
1.02
1.19***
1.23***
Saved (REF)
Just got by
0.96
Spent some, borrowed some 0.94
Some all, borrowed some
0.93
1.06
1.01
1.00
1.00
1.08
1.07
Full-time (REF)
Part-time
Self-Employed
Retired
Housewife
Student / Other
Unemployed
0.94
1.01
1.07
0.98
1.01
0.95
1.08
1.01
1.09
1.00
0.97
1.06
1.16***
1.02
1.08
1.05
0.99
1.00
Not At All Proud (REF)
Not Very Proud
Quite Proud
Very proud
1.62**
1.94***
2.11***
1.08
1.11
1.17
1.14
1.02
1.21
Non-Xenophobic (REF)
Xenophobic
1.20***
1.27***
1.38***
N
Tjur’s r2
4,899
0.28
5,250
0.23
6,676
0.14
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After the crisis there was a small effect in that being female made the respondent 1.1 times
more likely to prioritise nationals over immigrants. Again, since females are generally in less
well paid and less stable work, this is expected. In the second wave, age was also an
explanatory factor, with those over the age of 44 considerably more likely to prioritise
nationals. Accordingly then, there is some evidence to suggest that older respondents and
female respondents demonstrate higher levels of discrimination (Semyanov et al. 2002;
Semyanov et al., 2008), but it is not a consistent finding across the waves and gender only
becomes statistically significant after the crisis.
Overall, in terms of the second hypotheses, the results suggest that an individual’s economic
circumstance does has some effect on economic nationalism, but this is not an underlying
effect: it is only an issue following a crisis in the economy.
In terms of the third hypothesis concerning in-group orientation, there is more consistent
evidence in support of this relationship, but only for the xenophobia measure. The
patriotism variable has a strong effect in the first wave, with those who are proud of their
nationality being 2.11 times more likely to be economically nationalistic compared to those
who are not at all proud. In fact any degree of pride increases the likelihood of this attitude.
However, the effect of patriotism drops out of the following two models. There are no
particular changes in levels of patriotism, and interaction analysis (not shown) does not
show it driven by any particular country. Accordingly, this result is difficult to explain.
The measure of xenophobia is the only variable to have a consistent effect across all there
models. Economic nationalism it seems is not a cost-benefit attitude based purely on the
economic circumstances of the individual. It is also part-driven by prejudice, regardless of
the economic context, of either the country or the individual. Over the course of the three
waves it increases from making an individual 1.20 times more likely to be economically
nationalist in 1997, to 1.38 times more likely in the wave after the crisis.
The results in Table 2 show that there are considerable differences between the countries in
the dataset and the reference country, Sweden. There are clearly much higher levels of
economic nationalism on display in these countries, however, the difference between the
countries does decrease in the final wave of the survey, suggesting perhaps some
convergence of attitudes after the crisis
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Table 2: Country Effects
Country
Sweden (REF)
Spain
Chile
Mexico
USA
Wave 1
RR
Wave 2
RR
Wave 3
RR
4.33***
6.67***
6.11***
4.05***
4.63***
6.30***
6.15***
4.45***
3.23***
4.26***
3.80***
3.31***
CONCLUSION
Economic nationalism has been researched for many years and the conventional view of it
has been narrowly focused on protectionist state-level policy, set up as an oppositional
approach to neoliberal policy. However, reformulation of the idea has put forward the
strong critique that economic nationalism should be understood in a wider and more
discursive way, with a re-engagement with the nationalist element of the term. Nationalism
itself has a long history of being studied as a facet of social identity, and so this paper takes
that approach to look at how citizens might display attitudes of that are economically
nationalistic. The idea of RGCT has been used to ground the assessment of citizen attitudes
over three waves of the world values survey.
The study demonstrates that after the crisis RGCT has some explanatory ability as those in
worse off financial circumstances are more likely to be economically nationalistic. However,
before the crisis, these variables have no impact at all. A financial crisis then, may trigger
these attitudes. However, xenophobic attitudes are a consistent predictor of economic
nationalism throughout the time period studied, and so an attitude that is economically
nationalistic might have links to general more prejudicial attitudes. Further research is
needed to explore the role that economic nationalism plays in prejudicial attitudes.
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