After Brexit and in the wake of Donald Trump’s improbable victory, France has rejected the nationalist economic agenda of Marine Le Pen. It is not just Emmanuel Macron who reprimanded populism as an unfeasible solution to globalization. Romanian President Klaus Iohannis has endorsed the virtues of capitalism as part of an open political system, which promotes the freedom of movement for goods, capital, services, and peoples. And he did so in perhaps the most pointedly cosmopolitan way possible: by welcoming foreign investors to become part of the Romanian economy.
Romania is a strategic ally of the United States of America and a well-positioned country in terms of geography. Its land connects the steppes of Central Europe with the shores of the Black Sea, via the Danube River and the Carpathian Mountains. For centuries, commerce and agriculture were thriving in this part of the world. Communism, however, brought about the misery and poverty so aptly described by David Landes.
Since 1989, the Romanian economy has recovered slowly but surely. For nearly two decades, the political elites encouraged the administrators of the welfare state to exercise monopoly over many important industries. In the most arbitrary manner, the government has offered electoral bribes to ordinary people and subsidies for its leaders’ many business friends.
After Romania jointed NATO and the EU, its economic vibrancy started to pick up. In 2016, this former satellite of the Soviet Union boasted one of the strongest rates of economic growth inside the EU (nearly five percent of its GDP). Foreign investments increased 20 percent from the previous year, and the unemployment rate in Bucharest and Transylvania is remarkably low.
President Iohannis - a former mayor of Sibiu, a scenic medieval town built by the Saxons - has “categorically rejected recent populist attempts to oppose foreign investments to Romanian capital, multinational companies to Romanian SMEs [small and medium enterprises],” according to Romanian press reports. On April 25, the head of state addressed a large group of business leaders, telling them that his “deepest conviction is that Romanian entrepreneurship will be strengthened by a stronger cooperation with foreign investors.”
At a pivotal moment, facing nationalist pressures within his own country, Klaus Iohannis did not say “Buy Romanian, Hire Romanian.” Why? Because everywhere in the world, smaller countries are bound to buy products they themselves do not produce. Since no Eastern European country makes competitive airplanes, the owners of low-cost airlines (such as Wizz Air from Hungary or Blue Air from Romania) are bound to buy planes made by Airbus in France or Boeing in the United States.
Protectionism doesn’t work.
The president of Romania knows very well not just the syntax of the German language, but also the secret of the German economy: a large number of companies which export their goods worldwide. This is why for Angela Merkel, Emmanuel Macron, and their Eastern European counterpart, any form of economic protectionism spells disaster. An economy which heavily relies on exports is constantly searching for new markets and a cheaper labor force.
The most patriotic dreams are sometimes fulfilled by economic measures that open up the space for free trade.
The American situation may be different, because the U.S. economy is huge and diversified. Yet one should note that, once in office, President Trump has so far been reluctant to wage a tariff war between the U.S. and China. Any protectionist measure would make ordinary people from Wisconsin and Ohio pay larger sums of money for their t-shirt or hairdryer. This would very quickly hurt President Trump’s electoral base. On the other hand, it is quite obvious that capitalism naturally leads to multiple forms of “creative destruction” inside every industry. Amazon.com has radically changed the old ways of doing commerce. In some cases, Siri from the iPhone has replaced the good manners and amiable services provided by diligent secretaries in business offices. Sophisticated robots may also threaten the future of agriculture, transportation, or entertainment.
Can economic nationalism stop the energy of a globalized market? We must make a distinction between the political principle of national sovereignty (certified by the U.S. Constitution) and economic nationalism (the decision to build economic fences through tariffs and regulations). A nation can preserve its one without engaging in the other.
For instance, no one can argue that the free movement of people within EU countries has enormously benefited countries such as Romania, Poland, Hungary, and Bulgaria. (The negative side effect, the increased risk of terrorism, was primarily caused by the EU's feckless enforcement of its external border, not a threat posed by Europe's indigenous population.) Millions of seasonal workers making their money in Western Europe send back home their earnings via PayPal or MoneyGram, in order to support their poorer families and local communities. From 2009 to 2014, Romanian workers living abroad repatriated more than $15 billion – more money than the sum mustered by all foreign investors put together. This tells us that free trade and the absence of barriers create opportunities for people to flourish.
It is nonetheless true that the glory of a nation cannot always be expressed by its GDP. Romania is different from Hungary or the Czech Republic by virtue of its cultural fabric, language, customs, collective memory, societal norms, and so on.
Individual freedom remains the bedrock of moral virtues and the long-kept secret of prosperity.
One should therefore distinguish between the economically illiterate critics of globalism (such as Marine Le Pen) and the supporters of free trade (such as MEP Daniel Hannan) who nonetheless believe that nation states serve an important political function: protecting free peoples from any external aggression. Politicians are morally obliged to serve first and foremost their own citizens who, after all, voted for their program. Their allegiance should be towards those people, those particular people, and not towards multinational corporations. One shouldn’t regard the idea of national loyalty as obsolete.
However, the most patriotic dreams are sometimes fulfilled by economic measures that open up the space for free trade, for the free movement of people, and for the free exchange of ideas. The absence of genuine competition among various economic actors and nations usurps the innovative powers of human intelligence and will.
At all times and in all places, individual freedom remains the bedrock of moral virtues and the long-kept secret of prosperity.
(Photo credit: European People's Party. This photo has been cropped. CC BY 2.0.)