The British press had a field day with headlines after Tony Blair's landslide victory over John Major. The banners ranged from the simple "BURIED" to the playful picture of the Blair kids under "DAD IS PM." But one head-line struck me as wildly premature. It was in the leftist Observer and it blared: "GOODBYE XENOPHOBIA."
That headline referred to a key reason the Conservatives lost. Their party was utterly divided over the biggest issue in British foreign policy: how to deal with European integration. The Conservative "Euro-skeptics," led by Margaret Thatcher, argued that Britain should remain aloof from European Union plans to forge a single currency, otherwise Britain would lose its unique identity and independence. The Conservative "Euro-philes" countered that Britain could not thrive if it shunned the E.U.'s steady march toward political and economic integration. The Observer was predicting that with Major's defeat, the slightly more Euro-friendly Labor Party would bring an end to this anti-European xenophobia.I beg to differ. Nationalism in the age of globalism is still a real problem, and it's going to be a problem for Labor and U.S. foreign policy. Here's what we learn from the British election: Thatcher's revolution - breaking the unions, emphasizing privatization and technological modernization and catering to the stock and bond markets - did wonders for the British economy. But it produced great social strains and income gaps.
One reason Thatcher got away with this, without ripping apart the social fabric of Britain, was that she had the Falkland war against Argentina in 1982. The nationalist-patriotism stoked up by the Falkland war provided the glue she needed to keep Britain together just when her reforms were biting workers the hardest. Thatcher (and Ronald Reagan) later benefited from the collapse of the Soviet Union. After all, if the Socialist "Workers' Paradise" was imploding because its people wanted Western-style capitalism, who needed to take Western workers' demands too seriously?
What happened to the Conservatives in the 1990s was that they ran out of external enemies to relieve social tensions at home, and all they were left with was Europe. The E.U. became the enemy, but this posed a fundamental contradiction for Thatcherism. It was simultaneously advocating reshaping the British economy to take advantage of global integration and refusing to integrate politically with the E.U. on grounds that Britain would lose its unique identity and sovereignty.
Major reportedly went ballistic when his treasury secretary appeared on TV during the campaign wearing blue socks with the E.U.'s yellow star logo on them! So obsessed were the Conservatives with nationalism that they refused any autonomy to Scotland or Wales. (Labor offered each its own parliament.) The result: The Conservatives lost every Parliament seat in Scotland and Wales.
But they are not alone. In the current French elections, Jacques Chirac's Gaullist party has been urging French voters to approve the single Eurocurrency, even though it will bring pain on French workers, because the euro will become a real rival to the U.S. dollar. Chirac's Socialist opponents counter that French workers should reject the cuts in social benefits required for the euro, because this is an attempt to introduce "U.S.-style capitalism."
In Israel, MIT-trained Bibi Netanyahu is doing all he can to integrate Israel with the global economy, but his constituency has large elements of the Israeli urban underclass and ultra-Orthodox, both of which are threatened by globalization. Netanyahu's aggressive nationalism is no doubt heartfelt, but it's also an easy way to absorb and redirect social tensions produced by his economic agenda. The rise of China as America's new global enemy is surely related to the strain low-wage U.S. workers feel from foreign competition and technology changes that are shrinking their jobs.
The lesson here is that if your government intends to go the free-trade-globalization-information economy route, you'd better find a way of managing the social and economic tensions this produces. Otherwise the temptation to externalize those tensions in the form of nationalism will be enormous. And as the Conservatives discovered, you can't be a political nationalizer and economic globalizer at the same time.