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Free trade is not only desirable because it increases society’s total product by enabling the division of labour between individuals and countries. It is also morally desirable because it enables individuals to pursue their common interests without having to share one another’s values. Their interactions are reduced to the bare minimum necessary for mutual benefit. Thus, potential conflicts are avoided, both between groups and countries. Shakespeare’s moneylender Shylock would buy with Gentiles, sell with them, talk with them, and walk with them. But he refused to eat with them, drink with them, or pray with them. Commerce entails not only the minimisation of conflicts; it also exerts a civilising influence, because you begin to see the stranger as a potential customer rather than an enemy. This is the reason why the nineteenth-century activist Richard Cobden called free trade ‘God’s diplomacy’.
Nationalism: Aggressive or Peaceful
Globalisation is simply the extension of free trade to almost all countries worldwide. At first sight, globalisation and nationalism seem to be opposites. But we have to distinguish between aggressive, acquisitive nationalism and the peaceful, generous one. The distinction is illustrated by the Schleswig dispute between the German Confederation and Denmark in the nineteenth century. The northern part of Schleswig spoke Danish and identified as Danes. The southern part spoke German and identified as Germans. The German nationalists wanted to unite the entire Schleswig with Germany, thereby creating a Danish-speaking minority. The Danish nationalists wanted to unite the entire Schleswig with Denmark, thereby creating a German-speaking minority. Both groups were aggressive and acquisitive, trying to impose their will on reluctant subjects. A third position was taken by the Danish pastor and poet N.F.S. Grundtvig. He was a liberal nationalist who believed that the border should be drawn so that the Danes would end up in Denmark and the Germans in Germany, thereby dividing Schleswig according to the will of the inhabitants. Grundtvig’s nationalism was based on choice: those who chose to form a nation-state and cherish their shared identity should be able to do so. But at the same time, they should respect other nations and other cultures.
Small States with Open Economies
Some might argue that small states are not feasible. But the twentieth century saw a proliferation of independent states, from fewer than 50 worldwide at the end of the Second World War to around 200 now. Consider two examples. Iceland was, until 1918, a Danish dependency, and many enlightened, well-meaning Danes were sceptical about Icelandic independence. Compared with many other countries, however, Iceland has done quite well. She is a prosperous, civilised country. Mauritius was a British colony until 1968, and two Nobel Laureates predicted a dismal future for it: the economist James Meade, in a 1961 report for the British government, and the writer V.S. Naipaul, in a travelogue. But the people of Mauritius proved the two prophets wrong. They maintain the freest economy in Africa and have made great progress. In fact, small states tend to do better than medium-sized or large states, largely because they must maintain an open economy.
Larger Markets, Smaller States
Herein lies indeed the answer to the question posed: why globalisation and nationalism are not opposites. It is because globalisation enables small states to benefit from the international division of labour. They gain access to international markets, can concentrate on what they do best, and do not have to be, at a great cost, self-sufficient in everything. Thus, perhaps paradoxically, economic integration enables political disintegration, if by this we mean the proliferation of independent states. Because their economies are open, small states become feasible units. Their only real problem is security, but they can probably solve it through military alliances. The conclusion is that there is no contradiction in supporting free trade and the nation-state. Quite the contrary: the larger the market is, the smaller the state can be.