Yesterday, I encountered two different news stories that illustrated the deleterious health effects of nationalism. In China, a government policy based on national pride is resulting in thousands of needless deaths from COVID:

South Korea’s leading vaccine producer says it is unlikely to supply COVID jabs to China due to Beijing’s “national pride” and insistence on using domestic vaccines, even as the country is hit by its biggest outbreak of the pandemic.

China’s domestically-made vaccines are widely viewed as inferior to vaccines available in other countries.

China had plans to rapidly ramp up production of nuclear power plants, but has fallen well short of its goals:

They called for the mass deployment in both coastal and inland provinces, with a mixture of Chinese indigenous and imported technology. Together with hydropower, nuclear would comprise the backbone of China’s low-carbon baseload capacity additions.

Instead, new nuclear power generation has largely undershot those goals. Total nuclear capacity was just 51 GW by 2020, and China is now targeting just 75 GW by 2025. Meanwhile, coastal provinces are still approving tons of coal-fired capacity. What happened? . . . 

By the end of the 2010s, several things had become apparent to Chinese policymakers and energy planners: First, imported designs from the U.S. and France were taking longer to build and were costing a lot more than initially budgeted. Second, the trade war with the U.S. exposed Chinese nuclear developers to supply chain risks via their American suppliers.

Obviously, the slow rollout of nuclear is only a small portion of their environmental problem, but air pollution from coal is estimated to kill hundreds of thousands of Chinese each year. Just one more consequence of the US trade war.

Some of the effects of nationalism are obvious, as with the Russian war against Ukraine. Others are more subtle, as when a recent shortage of infant formula in the US was aggravated by trade barriers.

In some cases, Americans don’t even know that they are being hurt by nationalism. David Henderson recently pointed out that one factor explaining the low quality of airline service in America is the prohibition on domestic flights by highly respected international airlines, such as Singapore Air. I wonder how many frustrated Southwest Airline passengers are even aware that their government doesn’t allow them to choose foreign airlines? And how many are aware of how the Jones Act contributes to higher prices?

Does nationalism cause inflation? Yes and no. Most inflation is caused by monetary policy. If the Fed were serious about its 2 percent average inflation target, then nationalism would not cause any inflation in the long run.

In the short run, demand side inflation generated by monetary policy also raises nominal incomes. It is the inflation that Americans find especially painful, the supply side inflation, which is exacerbated by nationalism. For any given level of nominal GDP, policies such as Russia’s war on Ukraine and the US trade war on China cause prices to rise. This is the sort of inflation that reduces living standards.