Anyone Remember the Eighties?
One of the worst parts about living through the eighties was listening to all the angst about Japanese companies "buying America". I never really understood the issue that people had with foreigners buying American assets (beyond pure xenophobia). It was all especially puzzling because most of the wailing came from people who are today wailing about American outsourcing. So its bad when American companies buy productive assets in other countries AND its bad when foreigners buy productive assets in this country?
Anyway, I missed it the first time around, but apparently Paul Krugman is upset that a Chinese company might buy Unocal. Here are his reasons for concern:
Yet there are two reasons that Chinese investment in America seems different
from Japanese investment 15 years ago.One difference is that, judging from early indications, the Chinese won't
squander their money as badly as the Japanese did....The more important difference from Japan's investment is that China, unlike
Japan, really does seem to be emerging as America's strategic rival and a
competitor for scarce resources - which makes last week's other big Chinese
offer more than just a business proposition.
His first is just laugh out loud funny. We actually have an economist claiming that the world was better in the 1980's because there was a huge market inefficiency (ie, the Japanese overpaid for unproductive assets).
His second argument seems to be that US supplies of oil are more secure if American companies own them. This is stupid. If he means that it is more secure economically, then he should have his economist merit badge taken away for life. Even he must know that oil is a fungible commodity, and as such trades world wide at a price set by supply and demand. If more of Unocal's oil goes to China, this replaces other oil coming from somewhere else that is now available on the market. And, if he means it is safer politically, he forgot to study the last 50 years of history. Every major oil producer of the world - Saudi Arabia, Mexico, Venezuela, etc are pumping oil that used to belong to American oil companies, but was nationalized and taken from them. Does Mr. Krugman's statement mean that the left and the NY Times are suddenly more ready to support the property rights of American oil companies overseas? I doubt it. It is actually an improvement over history that a totalitarian state like China is actually buying American oil assets rather than just expropriating them.
By the way, I call Mr. Krugman's view of national economic success the "monopoly board" view of the world. In his mind, America and China are playing monopoly, and once China gets St. James Place, America can never own all the oranges. This is not the way the world works. When America grew economically in the last century, it did not mean that all the other countries had less opportunity to grow. In fact, we pulled many countries along with us. His zero-sum view is just the macroscopic counterpart to the zero-sum based worry about rich people getting richer in this country.
Marginal Revolution and Cafe Hayek both have good analyses of Paul Krugman's neo-mercantilism.
Postscript: Gee, I hate to play the race card, but why is it we always get a national panic when it is China or Japan buying US assets and not when it is the Dutch, the English or the Canadians (who are far larger investors in US assets and companies than the Chinese)?
