Between Economic Nationalism and Economic Liberalism: An Alternative View

What fashioned economic nationalism in the Philippines was an inward-oriented economic approach that became wedded to the postwar nationalist struggle. Its beneficiary, the industrial class, flaunted protectionism as an articulated ideology with universal aims. Nationalism was not only held up as the ransom of a sheltered, inward-looking economy, it was also appropriated as the instrument for its legitimation. An unresponsiveness to openness was the logical outcome of this nationalist mystification.

It is important to rise above this outlook by disengaging an economic strategy that follows the national purpose (economic well-being for the majority) from a clearly sectoralist, protectionist economic direction. To begin with, economic nationalism is neutral with respect to economic strategy. While it draws on the touchstones of national identity, it takes a variety of policy forms and is quite distinct from economic statist positions. Even liberalizing or deregulatory policies can be seen as instances of economic nationalism if they forge a common identity, improve general welfare, increase the prosperity of the nation and/or the power of the nation-state.

Thus, economic nationalism and economic liberalism might converge, through

  1. A set of welfare-oriented (but outward-looking) policies. Today’s anti-welfare forms of economic policies include monopolies, high tariffs, arbitrary trade disruption, and stricter migration laws, all of which prevent consumers from making informed choices about goods and services or job opportunities. A paradigm shift seems to be taking place, as illustrated by the recent spate of reforms in regional aviation (the entry of budget airlines has increased flow of travelers, especially those in the lower income brackets), telecom (more players has increased usage and reduced costs), and overseas migration (remittances relax constraints on health and schooling investment; greater competition for the “emigration slots” leads to increases in the country’s stock of human capital).
  2. Programs that promote economic security and (consequently) solidarity with the less privileged (society’s immobile factors of production). All that the poor favor are policies that promise to maintain economic safety nets—employment, education and health care—and not necessarily economic self-reliance. In an outward-looking economy, these policy initiatives include expanding international trade, promoting international competition, allowing migration, and encouraging foreign direct investment and capital mobility.
  3. Strengthened political and social institutions. While globalization involves the use of a host of instruments of trans-border transactions, these are nested in local political cultures, which lock society in a reinforcing pattern of conventional practices. Path dependence occurs because transaction costs associated with institutional change are non-trivial. Yet there is no alternative to developing stronger institutions by making changes in both societal norms and state processes—more legitimating universal terms, ones that seemingly transcend mere parochial interests. Likewise, of critical import is the task of finding informal institutions (such as norms of meritocracy and discipline in bureaucracies) that create incentives to comply with formal rules.

In the end, however, the challenge is how to engender the policy space for the state to manage the problems that openness creates. Given the Philippines’ “soft state” characteristics, the weakness of the institutional underpinnings that make open markets functional and politically sustainable is at odds with the liberalization agenda. This need for a “maneuvering room” would focus on devising the rules of the game to effectively deal with the interface between the global economy and the national regulatory regime.

Read full text of “Between Economic Nationalism and Economic Liberalism: An Alternative View” (in .PDF, 16pp.).

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