The Rise of Nationalism in International Finance: The Perennial Lure of Populism in International Financial Relations

Populism and nationalism are key drivers of current international economic relations, affecting almost all aspects of foreign economic policy. After almost four decades of cooperation in international financial relations, recent events suggest that we are now potentially entering a new phase of progressive disengagement. This new era would be dominated by the explicit need to safeguard domestic interests, in which regulatory barriers to cross-border finance will be more pronounced and curtailing the expansion of global financial markets will no longer be considered a policy taboo. This Article presents a brief history of financial nationalism and discusses some of its more recent phenomena around the world, from the regulatory conflicts between the European Union and the United Kingdom over the control of the European derivatives clearing market, to the attacks on central banks’ independence, or the open distrust of western regulators against the Chinese FinTech giants.

In contrast to other phenomena of economic populism, like trade protectionism, it is very difficult to theorize a single explanation behind this new protectionist push. Financial nationalism is neither an economic ideology nor a structured response to the downsides of economic globalization. More simply, it is the manifestation of a multiplicity of policy needs, which invariably lead to a reconfiguration of the inherent regulatory tradeoff between the protection of national sovereignty and the expansion of global markets; this time favoring the former.