The new age of economic nationalism

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In an era once governed by the exalted spirit of globalisation, a formidable counter current now surges across the face of the earth. The tumultuous aftermath of trade wars, the grievous disruptions wrought by the Covid-19 plague, and the energy crises, magnified by relentless geopolitical strife, have compelled nations to retreat inward, seeking strength and sanctuary within their own bastions rather than in the fragile embrace of international openness.

Economic nationalism long deemed a relic of a bygone age, hath arisen anew, asserting itself as the principal force guiding national policies and redrawing the grand design of global alignments.

Recent reckonings bear solemn witness to this sweeping global transformation. The World Trade Organization proclaimed that G20 economies have raised their average tariff rates from 2.2% in 2017 to 3.5% by 2020, thus marking the first significant ascent of global protectionism since the calamitous days of the Great Depression.

In like manner, the United Nations Conference on Trade and Development (UNCTAD) observed that over 60% of nations have enacted policies devoted to the “re-shoring” of critical industries.

The energy domain provides a vivid illustration of this shift. Europe’s reliance on Russian gas, once exceeding 40% of its total imports, has fallen to less than 15% by the end of 2024, driven by the urgent quest for energy sovereignty following the outbreak of the Russia-Ukraine conflict. Similarly, in the US, the Inflation Reduction Act of 2022 earmarked an astonishing $369 billion for clean energy investments, heavily conditioned on local production and the development of domestic supply chains.

Emerging economies have likewise embraced the banner of economic nationalism with commendable vigour. Brazil and Indonesia have enacted local content mandates and imposed stern restrictions upon the export of vital commodities such as nickel and agricultural produce. These measures herald a broader and more deliberate reorientation toward self-sufficiency and the exalted pursuit of strategic autonomy.

Foreign direct investment, once the very heartbeat of globalisation, hath suffered a decline of 12% since the days before the great pandemic, as reported by UNCTAD. Much of this investment is now bound within national borders or entrusted to allied nations, a practice now known as “friend-shoring”. Thus, the once free and certain flow of capital and goods stands constrained by the stern imperatives of risk and national interest.

Yet, the ascent of economic nationalism doth bear not only promises but profound perils. The International Monetary Fund hath sounded a grave warning: deepening economic fragmentation could diminish global GDP by as much 2%, with developing nations, so reliant upon the bounties of open markets, bearing the heaviest yoke.

Navigating this new era demands a delicate balancing act. Governments must pursue strategic autonomy without succumbing to isolationism. Essential sectors such as healthcare, energy and advanced manufacturing warrant national safeguarding. Furthermore, international institutions must be reformed and revitalised to mediate disputes, maintain fair competition and preserve a spirit of cooperation amidst the inevitable frictions.

Ultimately, the age of globalisation has not ended abruptly, but it has undeniably entered a period of recalibration. Economic nationalism is no longer an anomaly; it is the prevailing undercurrent shaping policy from Washington to Brussels, from Beijing to Brasilia. Whether this new reality will result in greater resilience or usher in a new era of division depends largely on the choices leaders make today. Protectionism breeds economic frailty.

The world stands at a fateful threshold. Strategic independence must be sought with wisdom; openness must not be scorned as weakness; and cooperation must remain the steadfast compass by which the nations of the earth navigate the ever-deepening complexities of an increasingly contested global landscape.

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