The history of the ethnic borderlands of Hungary and Romania in the years 1867–1944 was marked by changing national borders, ethnic conflicts and economic problems. Using a local case study of the city and county of Szatmár/Satu-Mare, this thesis investigates the practice and social mechanisms of economic nationalizing. It explores the interplay between ethno-national and economic factors, and furthermore analyses what social mechanisms lead to and explain inclusion, exclusion and annihilation. The empirical results show that citizenship in both countries was separated in an ethnically hierarchical way, making minorities secondclass citizens. This process of ethnic, and finally racial, exclusion marked the whole period, culminating in the annihilation of Jews throughout most of Hungary in 1944. The overall thesis is that economic nationalizing through the exclusion of minorities induces vicious circles of ethnic bifurcation, political instability and unfavorable conditions for achieving economic prosperity. Exclusion served the elite’s short-term interest but undermined the nation’s long-term ability to prosper.