There are two things that annoy me to no end: religion and nationalism. Both are fundamentally irrational and lead to a lot of nasty shit.

I’m therefore not happy at all that the global economic crisis has (as it always does) ushered in a new era of nationalism. Melinda Liu’s article on the subject is worth a read. Here’s a taste:

Even harsher statements are coming from a rising group of nationalist intellectuals in China. One of the most prominent, Wang Xiaodong, says China should simply stop buying U.S. Treasuries and put more money into domestic infrastructure, defense and social security—a move that could quickly turn America’s recession into a depression.

I don’t know the specifics of what these people are calling for. That being said, these kinds of folks can usually be grouped into two categories: realist nationalists and populist nationalists. (These are my labels.)

In my opinion, a realist will generally support policies that will benefit his country, even at the expense of other countries. This is fundamentally a rational point of view as it is strategic, long term and pragmatic. You may disagree with the foreign policies of folks like Henry Kissinger and George HW Bush, but there was undeniably some thinking going on there.

A populist also wants what is best for his country, but his support for policy is much more knee-jerk and based on irrationality, and is often focused on the short term. Maybe the Iraq War is an example of this, although the reasons for that war were many and the motivations of the key decision makers complex.

Here’s a very simplified example. A realist will work with other nations within a multilateral organization (e.g. WTO) in order to further certain policies (lower tariffs and trade barriers that will increase your nation’s exports). A populist will refuse to work at the multilateral level because national authority and law will be limited.

Which brings us to some current issues. The nationalist flavor of the month in China and the U.S. concerns the dollar. China is unhappy that it is stuck investing in and holding onto dollars. Granted. Decisions made by the U.S. government, which result in changes to the value of the dollar, have a significant effect on the value of China’s assets. I think any national government would be upset about that. Reminds me of the debate over the Euro in Great Britain.

China would like to see a move away from the U.S. dollar as the world’s reserve currency. Makes sense if you’re Beijing and you are a realist. As I wrote recently, however, this is more of an academic argument than anything else and not a very serious policy discussion with short-term consequences.

According to Melinda Liu’s article, it seems that the populists are going one step further, calling for China to stop buying dollars. Either this is hyperbole or something was lost in translation. If China were to do this, the dollar would tank and the value of China’s dollar assets would plummet. Great idea.

More domestic spending is another suggestion. This is actually a truly good idea and one that everyone is supporting, so it’s also kind of a straw man. However, is more defense spending a wise use of RMB?

Wang and his cohorts say China needs a stronger navy for its resource supply lines, which now extend from Australia to Africa. “All those commercial contracts mean nothing unless we have aircraft carriers to back them up,” says Wang.

Yikes. You know, I’m not a pacifist or anything, but it seems to me that huge armed forces these days are great ways to waste money. Aside from pirates, who else is out there to be afraid of? Everyone knows that the U.S. has a huge defense sector because of institutional corruption (the military-industrial complex). China does have a few strategic issues close to home, but that’s about it. I also think that men, who by and large run most national governments, simply like playing with guns, and the bigger the better.

The recent naval dust-up between the U.S. and China is used as an example of why China’s navy needs beefing up. Huh? The past two incidents (the one this month and the spy plane incident in 2001) only happened because you had two countries whose armed forces had nothing to do but probe each other. Am I naive to suggest that if you reduce your armed forces, those incidents may not have happened in the first place? I suppose I’m just a dirty hippie.

Economic nationalism, which has already led to trade protectionism, is bad enough. Once we start bringing the military into the debate, I go from annoyed to scared. I hope the economy improves quickly.