NCPA - National Center for Policy Analysis

How Economic Nationalism Bites Back

January 25, 2013

Important lessons can be inferred about economic nationalism from the actions of Germany and Britain around the turn of the 20th century. Indeed, competition from a growing Germany threatened Britain enough for parliament to embrace protectionist policies, says Edward Tenner, a visiting scholar in the Rutgers School of Communication and Information and an affiliate of the Princeton Center for Arts and Cultural Policy Studies.

  • In the two decades preceding 1900, Germany produced cheap manufacturing goods to compete with its main rival, Britain.
  • Feeling threatened, Britain stigmatized German products through labeling requirements, requiring that the origin of all products, regardless of nationality, must be marked on goods.
  • Despite the labeling requirements, importers and merchants found ways around the requirements that rendered the nationalist trade policies obsolete.

Just like foreign car brands that are "made in America" with imported parts, cheap German-made goods were assembled in Britain and flooded the markets. This terrified British industrialists who feared the decline of Britain's role as "workshop of the world." As the quality of German products improved, the labeling requirements originally intended to stigmatize German products became a recognized badge of prestige.

  • The United States experienced a similar backlash from protectionism during the postcard craze that swept the world around the turn of the century.
  • As a novel way of communication, German lithographers were the global-leaders in printing and producing postcards that were exported to countries around the globe.
  • In 1909, Congress passed the Payne-Aldrich Tariff of 1909, which limited postcard imports to support domestic U.S. producers.
  • U.S. postcards, along with a flood of German postcards imported in anticipation of the tariff, flooded the market. Postcards soon lost their popularity and the market bottomed out shortly thereafter.

Tenner states that the facts of these two series of events would suggest that any current American desire for economic nationalism is misplaced. Fears about the rising power of China might compel policymakers to enact policies to protect some industries with tariffs. However, these policies would be misinformed. The best way to encourage technological advancement and competition is by welcoming skilled immigrants and entrepreneurs to America. After all, that is the spirit of America that made this country great.

Source: Edward Tenner, "How Economic Nationalism Bites Back," The American, January 17, 2013.


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