Nationalist Solidarity and Development

I’ve recently come to the conclusion that a key ingredient for economic development is nationalism. It is something not widely considered in the economic literature, but a broad sweep of history seems to point to its importance.

The European states were bound together, and rose to greatness because of nationalism. Constant conflict encouraged innovation, and nationalist tendencies ensured that economic gains were predominantly allocated to strengthening the nation state. Asia also seems to have evolved in a similar – albeit less driven by military conflict – manner in the decades since the end of the Second World War. The elites of the nation that developed fastest – Japan and the other tigers - were intensely nationalistic and this focused their efforts, and ensured that their rewards were reinvested in their countries. China’s stirring nationalism has greatly aided its government in balancing dirty and oppressive growth with the strong legitimacy it still appears to hold in the eyes of its citizens.

This is the biggest problems that I see with countries today which are on the lowest levels of development, excluding those in the midst of fighting a civil war. The problem is that of those who get rich, few reinvest their money in their home countries. Too much is stashed in Swiss bank accounts, or transferred to other investments outside the country. This dooms developing countries to perpetual poverty as any surplus which could be used for investment at rates far below those charged by international financial markets on loans to developing countries.

Until there is a stronger sense of nationalism and solidarity in these developing countries, their governments will continue to be extremely corrupt and their wealth will continue to flow out of their borders to countries with more capital than they know what to do with. Nationalism isn’t a sufficient condition, but it is a required one.

This leads me to a concern for the developed world. Our societies seem to be losing a lot of the cohesion which was necessary in the past for our development. Societies can’t function properly when education standards are low, when accessing healthcare is a stressful and potentially financially ruinous. Where small segments of society reap massive financial rewards, but where the middle class is shrinking. Those at the top of they pyramid seem to forget that there are far more people at the bottom than at the top. If we do not change our self centered, purely profit driven systems, we may quickly find ourselves having lost so much of what we have struggled over the past century to build.