key term - Economic Nationalism

Definition

Economic nationalism is an economic policy that focuses on domestic production and consumption, with the goal of achieving self-sufficiency and reducing reliance on foreign markets. It often involves the use of protectionist measures, such as tariffs and quotas, to shield domestic industries from international competition.

5 Must Know Facts For Your Next Test

1. Economic nationalism aims to promote domestic employment, production, and self-sufficiency, often at the expense of international trade and foreign competition.
2. Protectionist measures, such as tariffs and quotas, are commonly used tools of economic nationalism to shield domestic industries from foreign competition.
3. The infant industry argument is often used to justify temporary protection of domestic industries, with the goal of allowing them to grow and become competitive in the long run.
4. Economic nationalism can lead to retaliatory trade policies from other countries, potentially escalating into trade wars and harming global economic cooperation.
5. Proponents of economic nationalism argue that it can help to preserve domestic jobs, industries, and national security, while critics argue that it can lead to higher consumer prices and reduced economic efficiency.

Review Questions

• Explain how economic nationalism is connected to the concept of protectionism and the use of tariffs.
  • Economic nationalism is closely tied to the policy of protectionism, which involves the use of trade barriers, such as tariffs, to shield domestic industries from foreign competition. Tariffs, which are taxes imposed on imported goods, make foreign products more expensive and less competitive compared to domestic products. This allows domestic industries to maintain market share and profitability, which is a key goal of economic nationalism. The use of tariffs and other protectionist measures is a common tool employed by governments to pursue economic nationalist policies and promote domestic production and self-sufficiency.
• Describe the infant industry argument and its relevance to economic nationalism.
  • The infant industry argument is an economic theory that suggests newly established domestic industries should be temporarily protected from foreign competition to allow them to grow and become competitive. This argument is often used to justify the implementation of protectionist measures, such as tariffs and quotas, as part of an economic nationalist policy. The idea is that by shielding these infant industries from foreign competition, they can develop the necessary economies of scale, technological capabilities, and expertise to eventually compete on the global stage. Economic nationalists often use the infant industry argument to advocate for temporary trade barriers to support the development of domestic industries and achieve long-term self-sufficiency.
• Evaluate the potential consequences of economic nationalism, both for the domestic economy and the global economy.
  • Economic nationalism can have both positive and negative consequences, both for the domestic economy and the global economy. On the positive side, economic nationalism can help to preserve domestic jobs, support the development of domestic industries, and enhance national security by reducing reliance on foreign goods and services. However, the implementation of protectionist measures, such as tariffs and quotas, can also lead to higher consumer prices, reduced economic efficiency, and the potential for retaliatory trade policies from other countries, which can escalate into trade wars. This can ultimately harm global economic cooperation and integration, potentially leading to a less efficient and more fragmented global economy. Additionally, the infant industry argument used to justify temporary protectionism may not always be effective, as domestic industries may become overly reliant on government support and fail to develop the necessary competitiveness to succeed in the long run.

Related terms

Protectionism:

Protectionism is an economic policy that restricts or regulates international trade to protect domestic industries from foreign competition.

Tariffs:

Tariffs are taxes imposed on imported goods, which make them more expensive and less competitive compared to domestic products.

Infant Industry Argument:

The infant industry argument suggests that newly established domestic industries should be temporarily protected from foreign competition to allow them to grow and become competitive.