[OUTLOOK]Nationalism: Everyone does it

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[OUTLOOK]Nationalism: Everyone does it

This is a joke a Finn once told me: Gather together some people of different nationalities, and ask them to write a book about elephants. A Frenchman will write a philosophical tome titled “The Elephant’s Life and Loves.” A German will write a zoological manual called “All Known Facts About the Elephant.”
The American’s book will be called “How to Make Millions from Elephants.” But the title of the Finn’s book will be, “What Does the Elephant Think of the Finnish People?”
Though it is now one of the wealthier countries in the world, until World War II Finland was one of Europe’s poorest. The Finns long lived in the shadows of more powerful countries; it was ruled by Sweden for six centuries, until 1809, when it began more than a century under Russian dominance.
Not surprisingly, they became a people who tended to be overly sensitive about what others thought of them. The story of the elephant book is a bit of self-mockery about this national trait.
Surrounded and dominated by stronger countries, the Finns developed a strong nationalistic streak, and took a very hostile stance toward foreign capital. From the 1930s until 1993, when it joined the European Union, Finland categorized all businesses with more than 20-percent foreign ownership as “risky,” and put them under special supervision.
We Koreans, having also experienced the difficulties of being surrounded by stronger nations, have similar tendencies. On one hand, we are envious of powerful countries, and are constantly trying to figure out what they’re thinking. On the other hand, we have a strong inclination toward nationalism.
From the 1960s to the 1980s, our government’s economic policies were very nationalistic, though not to the degree that Finland’s were. Our government severely restricted foreign investment, and made extensive use of tariffs and subsidies to protect and promote our fledgling industries.
But with the opportunities opened up in 1993 by the Kim Young-sam administration’s decision to join the Organization for Economic Cooper-ation and Development, and the administration’s declaration that Korea would embrace globalization, economic nationalism began to be denounced as a regressive ideology. The foreign exchange crisis of 1997-98 made it even more clear that there would be no turning back from globalization.
But many problems were created by the unconditional opening of the country’s markets in the wake of the foreign exchange crisis. As our government has recently, and belatedly, tried to take corrective measures, influential foreign economic newspapers that speak for foreign funds and foreign investors have reacted with irritation, calling these moves a resurrection of Korea’s economic nationalism, long thought dead.
But that response is quite wrong. For instance, the Financial Times, the influential, London-based business newspaper, recently criticized our government’s revision of the so-called “five-percent disclosure rule” in the Securities and Exchange Act. But that revision was meant to enhance transparency about the sources of large shareholders’ funds, and has nothing to do with the nationality of the capital.
What’s more, the five-percent rule is used in many other countries, including the United States and England. In criticizing this rule, is the newspaper demanding a privilege for foreign investors beyond equal treatment?
Our government’s firm stance against this unfair criticism is praiseworthy, but this alone is not enough. For example, let’s consider the issue of placing limits on foreign directors at Korean banks that was considered recently by the Financial Supervisory Commission.
Historically, many countries, including the United States, have imposed such limits. Even now, similar restrictions are being adopted by Sweden, Switzerland and other countries. Nevertheless, Korea’s Ministry of Finance and Economy decided not to impose the rule, explaining that the restriction on nationality would be a hindrance to globalization.
But the notion that globalization makes national borders irrelevant is a myth ―one with its roots, in fact, in the economic nationalism of advanced countries. Such countries say there should be no borders when it comes to the flow of capital. But when underdeveloped countries talk about the flow of labor, suddenly these advanced countries find national borders to be a necessity.
They impose heavy regulation on foreign investors under the pretext of national security, public order and balanced regional development. While criticizing less advanced countries for subsidizing their manufacturing industries, these countries subsidize their own vulnerable farming sectors to the tune of a trillion dollars per year.
We would be unwise to practice “pure” cosmopolitanism when wealthy countries are practicing their own economic nationalism. Should a country whose economy now ranks among the world’s top 12 continue to worry about what “the elephant” thinks of us? Unconditional hostility toward foreign capital is not right, but as we pursue globalization, we should be firm about imposing restrictions on foreign investors when necessary.

* The writer is a professor of economics at the University of Cambridge in England. Translation by the JoongAng Daily staff.

by Chang Ha-joon
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