Fear and those scoundrels of economic patriotism

Several foreign takeovers have been axed recently because of fears about national security and identity - some rational, some not

Friday, Mar 24, 2006,Page 9 Samuel Johnson called patriotism "the last refuge of a scoundrel." If that is true, what should we think of today's mounting economic nationalism, sometimes euphemistically described as "economic patriotism?" Indeed, economic nationalism is exceptionally vigorous at the moment. Vigorous popular opposition to a Dubai company's plan to take over ports in the US shocked the American government. Poland is witnessing a populist backlash against foreign ownership of banks. France is blocking the acquisition of French utilities by the Italian electricity company Enel. Together with other European governments, France is also agitating against the takeover of the Luxembourg-based steel company Arcelor by a Netherlands company largely controlled by an Indian steel magnate.

Defenders of these ill-fated cross-border takeovers worry that a sinister whiff of the 20th century's worst moments is in the air. An outraged Italian minister warned of a new mobilization of populist nationalism in an "August 1914" scenario. The better analogy is from the 1930s: In 1933, the year in which Hitler came to power, the world's most famous economist, John Maynard Keynes, produced a plea for "national self-sufficiency."

Both the 1914 and the 1933 analogies point to the most striking characteristic of the current debate: the key role of security worries in justifying protectionism. Nobody worried about foreign ownership of US ports as long as the owner was a British company; the new fears reflect the belief that Dubai might be a channel for Islamic fundamentalism and terrorism.

Likewise, the deterioration of international relations before World War I and World War II was marked by governments' increased propensity to use economics as a tool of power politics. In 1911, the diplomatic crisis over Morocco was accompanied by a French speculative attack on German financial markets. In the 1930s, both France and Germany used this kind of technique as a way to bolster their own security. The US tried to control Japanese expansion in Asia by limiting Japan's energy (especially petroleum) imports.

The most obvious reason for increased worries about security in the US is the challenge of meeting the threat of terrorism after the attacks of September 2001. But that can scarcely explain European nervousness and the protectionist reaction. In Europe's case, two contrasting explanations exist. The first is that the new worries are a strange case of psychological transference. People in places like France and Poland who worry about national decline seek to blame somebody outside the country.

There was certainly a great deal of this type of sentiment in the 1930s, when the populist response to the Great Depression attributed it to the sinister forces of "international capital." The modern version of this explanation holds that the world is changing so quickly that national security and, indeed, national identity, are under threat.

An alternative scenario suggests that these fears emanate from a real problem. Modern economic growth still depends in almost every advanced industrial country on imported energy (Norway is an exception). Because of fears about pollution, or about the safety of nuclear energy, most countries neglected to build up their own capacity.

The resulting vulnerability was highlighted by the Russian reduction of gas supplies to Ukraine in January, which resulted in reduced flows to central and western Europe. The experience made Poles particularly jittery, and pushed the country's populist right-wing government down the road of economic nationalism. But West Europeans remember their own traumas, including electricity grid failures and widespread blackouts. Wouldn't an Italian company facing grid failure prefer to shut down French rather than Italian consumers? These two scenarios of the origins of economic nationalism, one irrational and the other not, are not real alternatives, but describe responses that intertwine: the more rational the fear, the more that fear can be used as an instrument of politics. Fear creates a demand for state action. Politicians like this because it increases demand for their services. They point out the potential problem and then attempt to sell solutions that lie within their nationally defined spheres of competence.

One modern politician, in particular, has been effective in placing nervousness about energy supply at the center of a new political vision. According to Russian President Vladimir Putin, the need to control and secure energy justifies a massive extension of state intervention in the economy.

Putin's vision was apparently vindicated by the aftermath of the terrorist attacks on the US. Since then, Putin has projected his vision of politicized energy in a way that makes all Europeans, not just Russians, nervous. That bolsters his strength in the Russian setting. But a Putin in one country has a tendency to produce Putin imitators elsewhere. We should be concerned about the efficiency losses in markets where restrictions stemming from economic nationalism have so far been imposed. But we should be far more worried that fear about the collapse or manipulation of markets creates a demand for action that makes such a collapse more rather than less likely. Fear generates a demand for more security that is in the end paralyzing.

Harold James is professor of history and international affairs at Princeton University.

This article by this professor vindicates my claim as I wrote here:

What you should consider is that these new age 'free traders + globalists' came about among economists and political scientists as a socio-economic answer to creating utopia.

After WW2 there came together a belief that a golden age was lost to the First World War (as you can see this author mention above in passing). To these Utopians the world up to 1914 was one of free trade, prosperity, open borders and possibilities. But if that was the case, why did the failure of WW1 happen? We are still living in the world made by the fall out of WW1 - from the break up of Yugoslavia to the Middle East to Russia and China.

These free trade Utopians came up with an answer - what stood in the way of peace in an era of free trade and open borders was nationalism. That it did not matter that nations traded with each other with almost no restrictions - they were prone to nationalistic outbursts which destroyed the free market system.

Solution?

To bring about the end of the nation state. To make borders and nations passe.

There is no one world govt on the horizon - it is the elimination of nations beyond some nominal system like the EU which preserves the fiction of nation states. That is why it resembles Karl Marx's thesis on free trade - it is a combination of Marx and Smith and Ricardo - it is classic Communist dialectic synthesis thinking.

If you are looking for a George Soros type to rule the world as a dictator you are mistaken. That is not the goal. Sure, they may be a UN international criminal court and such but the goal is to reduce the nation state to nothingness to allow free trade and rebuild this pre 1914 Utopia.

They think that will stop the trauma of another WW1 which caused the depression and WW2 and the Cold War and the little post colonial terrorist wars around the world.

That is why Yugoslavia was the first test of this doctrine. That is why nationalists like Putin are hated because they look to their own nation's first rather than participate in the open border movement.

Talking about this issue in terms of protectionism and wage scales, and competitiveness - illegal immigration - all meaningless - a waste of time.

'Imagine there's no countries' - John Lennon

BUMP!

The apostles of the Davos Globalism scheme typically manifest themselves not only by words, which can be camouflaged and false....but by their anti-national deeds. Deeds which fundamentally neglect national borders, national security...and at the highest levels. These deliberate neglects and 'unconcerns' will simply betray us all into the control of the Red Chinese...who even more explicitly than Putin are playing a nativist nationalist Communist game.

Here is an example of one such area of national security neglect:

Report: U.S. missile science slumping

By Matt Kelley, USA TODAY

WASHINGTON — The Pentagon risks running out of scientists to operate and upgrade the nation's arsenal of intercontinental nuclear and conventional missiles, according to a report released this week by the Defense Science Board.

As the nation's veteran engineers and scientists retire, the military will lose much of its expertise in long-range missile technology, the report says. That means the Air Force and Navy, which operate most of the 1960s-vintage missiles, will be unable to cope with system failures or develop improved weapons, the report says.

Not only are fewer American engineers and scientists choosing to work on missile technology, there are fewer of them altogether, the report says. Each year, about 70,000 Americans receive undergraduate and graduate science and engineering degrees that are defense related, compared with a combined 200,000 in China and India, the report says.

The government should pay higher salaries and offer other incentives to attract more experts into the strategic missile field, the report says.

A task force of five outside missile experts spent two years preparing the report at the Pentagon's request.

A litany of weaknesses

A two-year study by a panel of the Defense Science Board found several flaws in the nation's strategic missile system. They include:

Lack of expertise. There's a shortage of industry and government expertise in long-range missile systems, and what exists may not be available for future systems.

Rebuilding costs. It would take five to seven years to rebuild a skilled workforce, and even then there would be mistakes and cost overruns because of inexperience.

Failure to cope. The Department of Defense "may not be able to cope with unanticipated failures" in intercontinental nuclear missiles.

Inexperience. It's been 25 years since the last long-range missile was designed, and few in the Air Force have helped design a missile system.

Shortages. There's an "alarming" lack of missile expertise in the Defense Threat Reduction Agency, where severe shortages of civilian experts exist in 124 of 163 critical skills areas.

Need for incentives. Defense contractors and the Pentagon must increase pay and incentives to attract "the best and brightest students" to missile programs they have avoided in favor of better-paying jobs.

Although the board lacks the power to force the Pentagon to act, Lt. Gen. Frank Klotz, acting head of the Air Force Space Command, told a Senate committee this month that the Pentagon is trying to improve its recruiting and retention of missile experts. Space Command runs the intercontinental ballistic missile system.

The report does not give specifics on the number of experts who are retiring or the numbers needed to replace them, but it says about 20,000 research and development scientists and engineers work in the aerospace industry as a whole, down from more than 140,000 in the mid-1980s.

John Steinbruner, head of the Center for International and Security Studies at the University of Maryland, says few scientists want to work on long-range missiles because "it's not too hard to figure out that American security doesn't depend on this any more."

Instead, Steinbruner says, the Pentagon's priorities have shifted toward fighting terrorism and "low-intensity conflicts," such as the insurgency in Iraq.

The report, he says, sounds like the Pentagon advisory board is "just trying to keep the money flowing" and may be biased toward Cold War-era ballistic missile systems.

The report also questions a Pentagon plan to seek more than $500 million to replace nuclear warheads on some submarine-launched Trident ballistic missiles with conventional warheads. The Pentagon says those missiles could be used to strike fortified targets such as nuclear weapons facilities in rogue nations.

Converting the warheads on these missiles will be difficult, the report says, because the Pentagon lacks the necessary engineering skills. It adds that technical requirements for non-nuclear warheads are much different for long-range missiles from those for shorter-range missiles or nuclear weapons.

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