Classical liberals are basically supporting individualism and a small government (Locke, Hayek, Friedman). The small government being there to insure basic services such as the military, the police, avoiding monopolies, maybe doing a very little bit of redistribution of some sort (school vouchers).
On the other hand, IMK, nationalism was born out of events motivated by classical liberal ideas: the American revolution and the French revolution. To Kelly (2015), liberalism and nationalism were interconnected:
Mazzini, Kossuth, O’Connell and Simon Bolivar in South America, were all influenced by liberal political ideas and espoused ambitions for liberal constitutional orders in place of political absolutism. Indeed for much of the early nineteenth century liberalism and nationalism were interconnected. This had an important impact on the subsequent development of liberal political theory and gave rise to the idea of liberal nationalism, an idea that is given its most forceful Anglophone statement in the nineteenth century in the political theory of John Stuart Mill (1806-1873).
Even though we don't adopt a romantic ethnico-cultural kind of nationalism, but a more liberal one (based on the ideas of political liberty, individual freedom, etc.), I don't know how we can reconcile liberalism and nationalism, since nationalism implies necessarily some form of "groupishness" [1] and some form of coercition (in order to protect the group against foreign invaders, as this is basically how nationalism was born).
How do classical liberals reconcile individualism with nationalism?
- The definition of nationalism by classical liberals
"A considerable quantity of people, who inhabit a certain extent of country, enclosed within certain limits, and who obey the same government." (L'Encyclopédie)
"A nation is nothing but a collection of individuals." (David Hume, "Of nationals characters")
- The definition of nationalism as provided by Wikipedia:
Nationalism is an idea and movement that holds that the nation should be congruent with the state. As a movement, it tends to promote the interests of a particular nation (as in a group of people), especially with the aim of gaining and maintaining the nation's sovereignty (self-governance) over its homeland to create a nation-state. It holds that each nation should govern itself, free from outside interference (self-determination), that a nation is a natural and ideal basis for a polity, and that the nation is the only rightful source of political power.
References:
Kelly, Paul (2015) Liberalism and nationalism. In: Wall, Steven, (ed.) The Cambridge Companion to Liberalism. Cambridge Companions to Philosophy. Cambridge University Press, Cambridge, UK. ISBN 978110743941