[Viewpoint]Selfish laws only hurt the economyThe world economy is at a crossroads, but not because of the financial crisis that spread from the United States to the world last year. Economic nationalism has emerged in the wake of the crisis as nations have tried to overcome it, and that’s what is pushing the global economy into the jaws of death.
The Economist, the British magazine, recently published a special series about the ghost of economic nationalism rising from the dead. This ghost, believed to have vanished, has reappeared in the wake of the economic crisis.
Economic nationalism has reared its head in both the financial industry and the general economy. Each country is trying to revive only its own companies in an act of financial mercantilism, while protectionism has emerged in global trade.
Both approaches are relics of a bygone era, when nations built higher walls around their borders and discriminated against foreigners.
This harmful nationalism first infected the financial sector. In the aftermath of the subprime mortgage crisis in the United States, almost all financial institutions around the world were hit. As money flow stopped, financial companies hunted for cash desperately. Some received emergency bailout funds from their governments, others were nationalized or are close to it.
Financial nationalism becomes plain to see when a government intervenes. As soon as it receives tax money, a once international financial company becomes beholden to a particular nationality. A bank that was rescued with government money can no longer enjoy independence from the government. The government of each nation puts pressure on financial companies that have received bailout funds to feed money into local companies. The story is the same in cases of providing deposit protection or guarantees.
Since the crisis, the global financial market has moved strictly based on nationalism. Financial companies have sold assets overseas to bring in money to their homelands. Amid this severe crunch, a fierce war has begun to secure cash. The international financial market has gone back to the days of mercantilism, when the possession of gold and silver was the standard of a nation’s wealth.
Nationalism has materialized on the ground as each nation has begun to employ economic stimulus measures. A classic example is the passage of the economic stimulus bill in the United States, which includes “buy American” clauses. U.S. President Barack Obama has expressed concerns about excessive protectionism, but he did not veto the clauses.
Countries which have adopted economic stimulus measures such as England, Germany, France and China have all pursued trade protectionism, though to varying degrees.
They all know that what they are doing is in violation of the principles of free trade, but they do not hesitate to provide overt support for their native industries over those of other nations. A warning on this topic from World Trade Organization Director-General Pascal Lamy was ignored.
And yet they criticize other nations’ trade protectionism, calling it “economic opium” and a “poison killing the global economy.”
Today, the global economy has become an arena of mud-slinging battles between each selfish nation, and trade protectionism provides the weapons.
Economic nationalism will eventually destroy what it was meant to save. The economic recession will deepen and normalization of financial markets will take longer. If the global economy fails to walk out of the swamp of nationalism, then we could face a setback as long as one generation.
Economic nationalism is a classic example of a “death of a thousand cuts.” Each country adopts measures to survive alone, and that adds up to lead the world down a path to collective destruction.
What we need at this moment is true global leadership to lead the world out of this trap.
In the era of industrialization, England played this role, and the United States also has done so since World War II. Right now, the United States is probably the only nation that can show such leadership. However, it is deplorable to see that the United States is actually leading the world toward economic nationalism.
The Group of 20 summit is probably the only hope at this point, but it is doubtful whether such a large number of leaders from the most advanced economies in the world will be able to speak in unison to pledge their efforts to end economic nationalism.
*The writer is an editorial writer of the JoongAng Ilbo.
by Kim Jong-soo