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The perils of nationalism

By Kane Loxley - posted Friday, 13 March 2009

SBS recently screened a rerun of a South Park episode in which America is awash with aliens from the future who, due to the Earth’s over population, come back in time to work for low wages. The reaction of many present-day Americans to the cheap labour invasion is reduced to a mantra, “they took our jobs”, which by the end of the episode becomes an indecipherable non-sequitur: "dey duk err jerbs!"

Admittedly, it’s quite a stretch to analogise immigration by time travellers with the present economic crisis, however the defence mechanism of the South Park residents is not so different to the “us and them” mentality that has begun, ever so slightly, to manifest in Australia as unemployment rises and the crisis deepens.

Kevin Rudd has made it unequivocally clear that, despite his much publicised invective against neo-liberalism, he is all for free-trade and all anti protectionism. In response to questions about the protectionist elements of President Obama’s stimulus package, Rudd quipped “the Australian Government’s position has never changed. It is a position informed by history and the appalling history of the Smoot-Hawley tariffs of the 1930s.”


You have to feel for Reed Smoot and Willis Hawley. The pariahs of protectionism, their legacy has been reduced to a sound bite for 21st century leaders warning against the perils of nationalism. The duo’s attempts to save American jobs by legislating to raise tariffs to record levels became a catastrophic failure as each of the UK, France, Germany and Italy reciprocated, leading to the shedding of jobs at US exporting companies and an ensuing trade war which exacerbated the Great Depression.

However, it appears not all Australians share our Prime Minister’s eye for history. The Australian Council of Trade Unions has tied public outrage over executive pay at Pacific Brands to a call for increased protection for Australian industry.

Meanwhile, Australian Workers Union secretary Paul Howes has said, "we need local content rules for this period of this crisis that gives our manufacturing industry a boost and fuels the infrastructure that our nation needs".

The comments by Howes, who clearly eyes the well-trodden road from union boss to Labor MP, indulge in populist sentiment and fail to account for the bigger picture. Protection breeds protection and if Australia makes even a subtle move towards assisting domestic industry at the expense of foreign competition, our trade partners will repay Australia in turn: by reducing their consumption of Australian exports.

For an export-reliant economy such as Australia, this could have disastrous consequences and, as seen in the 1930s, reciprocity could have a domino-effect across the globe. This must remain prominent in the minds of governments who face not only increasing nationalistic pressures at home, but also unprecedented levels of interconnectivity. The paradox of protection is, as The Economist recently put it, “as countries try to save themselves they endanger each other”.

But because the benefits of foreign trade are often not readily apparent, scepticism can emerge. “They took our jobs” might be a South Park caricature, however it has some resonance when iconic Australian companies like Pacific Brands shift their operations overseas. Without losing compassion for the 1,850 Australians put out of work, it is important that as a country Australia strives to disassociate the loss of “Australian jobs” from a parochial, nationalistic response.


Trade facilitates specialisation and as an exporting nation which has prospered from the benefits of trade, we cannot have a bet each-way and turn inwards when the global economy takes a dive. Despite the global market’s conspicuous flaws, it allocates capital more efficiently than a local market and if a downturn means the hard edges of this allocation become exposed, then this is a natural, if at times unpalatable, consequence.

Times of crisis, economic or otherwise, prey upon our nationalistic impulses, which tend to lay dormant as the spoils of sustained prosperity or peace are enjoyed. While rising unemployment is confronting, this is a product of a cyclical downturn (albeit, in some respects, an unprecedented one) and to batten-down-the-hatches would be to overlook the bounty that freer trade has provided us.

The building of strong export markets throughout Asia, combined with increased foreign investment, have augmented employment levels and living standards. A return to atavistic policies which focus upon the protection of jobs at the expense of free trade, however well intended, will create far more problems than they solve.

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About the Author

Kane Loxley is a Law/Arts graduate from the University of Western Australia who is currently working at a Melbourne law firm.

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