Read the case below. Answer the following questions. 1) Is economic nationalism
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Question
Read the case below. Answer the following questions.
1) Is economic nationalism justified?
2) Is the Smoot-Hawley plan better or worse than “Buy American”? “Buy Spanish”? Or “British jobs for British workers”? Explain fully.
MINI CASE: ECONOMIC NATIONALISM Buy American! Buy Spanish! British jobs for British workers! The ideology of economic nationalism seeks to implement trade policies that help to keep jobs and investment at home, while ignoring the advantages of open international trade and invest ment. Economic nationalism was popular during the Great Depression of 1929-33, when it served to unemployment at that time, the bill was passed in order protect domestic firms from international competi-to keep jobs at home. This resulted in retaliation from tion. However, this led to curtailing international other nations as they raised tariffs on exports from the business activity, making the global economic slow- United States and other countries. The net result was a down worse. Widely recognized as a myopic policy, ruinous fall in global trade and a worldwide depression. economic nationalism nevertheless re-emerged dur- ing the global financial crisis that originated in the faced the worst recession since the Great Depression, the United States in 2008, prompting many analysts tocall for a new round of trade barriers was being debated. wonder whether the public has learned anything from international business history. Soon after the U.S. stock market crash of 1929, Willis Hawley and Reed Smoot, two Republicans in the U.S Congress, sponsored a bill to raise import tariffs to the highest level in U.S. history.2 Given the high rate of U.S In late-2008 and early-2009, when the United States However, this time, the focus was upon inserting non- feared retaliation against their goods and services. tariff barriers on items in the American Recovery and Canada, in fact, soon threatened retaliation. Meanwhile, Reinvestment Act of 2009, which was meant to give the other countries moved in similar directions. The British floundering U.S. economy a boost. This legislation, com prime minister talked of "British jobs for British work- monly known as the "stimulus package, included a "Buy ers," the French president urged French car compa- American" provision that restricted government spend nies to invest at home rather than elsewhere in the ing to U.S. companies. As a result, public works such as European Union, the government of Spain launched a infrastructure projects were required to use commodi ties such as iron and steel that was domestically sourced, despite that these products cost more than imports from countries such as China. Similarly, the development and delivery of computerized medical records would be restricted to domestic IT firms, even if such services could be sourced at a much lower cost from India. Buy Spanish" campaign. It may not be Smoot-Hawley but the global implications could be the same QUESTIONS 1) Is economic nationalism justified? 2) Is the Smoot-Hawley plan better or worse than "Buy Some experts argued that such protectionism may violate international trade rules, and U.S. exporters American"? "Buy Spanish"? Or "British jobs for British workers"? Explain fullyExplanation / Answer
Q.1. Economic nationalism simply can be viwed as protecting an economy from the competition of the outer world by closing doors of the economy. This nationalism could be achieved through various moves like restricting imports, huge trade barriers, barriers on foreign direct investment, restricting capital and labor flow across nations etc. All the moves are directed only toawards one thing and that is protection of domestic economy. Such protection is sometimes required when the economy witness some recession or downturn but this protection has severe ill consequences. As reported in the study such measures do provide protection but globally the effects are vulnerable. Low economic activities, less investment, ineffecient use of capital, ineffecient use of labors are few example. On national level, countries also incurrs various kinds of cost inthe attempt of such protection.
Q.2. Buy American, Buy Spanish encourages closed or restricted economies that are open to the world stage. America should buy american products only or Spanish should buy Spanish goods only just focus on encouraging the domstic economic boost on the cost of international trade and relations.
Smoot Hawley act was formulated as an Act to provide revenue, to regulate commerce with foreign countries, to encourage the industries of the United States, to protect American labor, and for other purposes as well. The main provisions were related to imposing tarriff on trade.
This act or plan is more or less similar to the policies promoting "buy American/Spanish" "British jobs for british workers".
Because this plan also holds the same idea of restricting international trade, capital and labor flow.
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