Sunday, April 6, 2014

An article on the economics of nationalism by Albert Breton, 50 years later

In 1964, the Public Choice Canadian economist Albert Breton published a classical article on "The Economics of Nationalism." The main thesis of the article is that nationalism is an investment in nationality or ethnicity that has a very low or negative social return but that has significant distributive implications in favour of the elites or leaders of a particular national or ethnic group. His examples come from the case of Quebec, where in those times a nationalist movement that later became secessionist was becoming more and more powerful. One of the sub-themes of the article is that the left was an ally of this movement, because one of the expressions of nationalist governments in the province of Quebec was the nationalisation of electricity companies and the creation of other "national" public structures. The article has all the flavour of the public choice: the assumption that all economic agents are rational and self-interested (both market participants and policy makers), and a bias against the left. Policy makers are not benevolent agents who act to promote social welfare, but individuals that have individualistic preferences like everybody else. Therefore, most initiatives of governments are self-interested, which is the origin of a distrust of interventionist doctrines in general. What has changed today? Today, the public choice dogma has been replaced by a more balanced (not necessarily anti-left) political economy, where certainly there are no intrinsic differences between different economic agents, but where some improvement can be achieved through collective action by governments or communities. Additionally, agents are recognized to be not always rational, but affected by biases and behavioural anomalies, both in the market and in the political domain. On nationalism, the left in democratic countries will hardly benefit from selfish policies that do not address the international dimension of social problems such as inequality, financial instability or climate change. What survives today from the insights of Breton is the idea that nationalism in democratic countries is a strategy (today accompanied by all kind of behavioural tricks) that has a low or negative social return, but that benefits the elites of some national or ethnic groups.

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