Thursday, August 02, 2007
It's all about ownership
Conservatives love "National Sovereignty" and "Ownership Society" as talking points, but when it comes down to brass tax, what do they really mean?
Now that Rupert Murdoch owns the Wall Street Journal, the only reputable economic forum left in the western world seems to be The Financial Times of London. The latter ran an article this week by Lawrence Summers regarding Sovereign Funds, and their antithesis to capitalism, and, well, national sovereignty. A sovereign fund is a state owned asset which exists to purchase stakes in private companies. All governments, at least in the industrialized world, do this in one form or another. However, the idea of the sovereign fund as an engine of capitalism becomes something else when paired with an equally strong engine of protectionism. We're seeing this with the emergence of China.
China already has two economic weapons they hold over our heads: they own more of our debt than almost any other country, and in addition, due to our insane conservative trade policies, we can't even manufacture an aircraft carrier without parts they make. The emergence of China in the sovereign fund game has given them a third piece of leverage against us. China has been buying large, and in some instances controlling, stakes in American private equity funds and corporations. On the surface this just seems like the nature of global free trade, but when you consider the fact that China will not allow foreign investors to own even a small interest in any Chinese company, the disparity becomes evident.
It used to seem somewhat over the top to say that China could literally sink the entire United States economy with one flick of the stock ticker, but it's now becoming more and more a cause for concern. China (along with Mexico and Brazil) almost exclusively produces all American steel, textiles, clothing, machinery, electronics, high tech components, and in some cases our food. (Faltering global supplies of grain are another security issue, though one best saved for another post.) I don't want to sound like an alarmist, but considering China controls a vast amount of our economy, commodities, and food supply, if they were to, say, launch a military offensive against Taiwan, we would be almost foolish to intervene.
It's all about ownership. China isn't the only country to take advantage of our conservative ownership and trade policies, while protecting their own country's sovereign interests. The tragedy in Minnesota this week has highlighted the large disregard conservative economics leaves for our infrastructure. From Roosevelt until Reagen, we considered infrastucture akin to national security, and an investment in our nation's future. Now, Spain and Australia own large swaths of U.S. highways and toll roads. We literally pay foreign companies for the privelege of driving on our own American roads. Japan, Saudi Arabia, The United Arab Emerates, and India all also own huge chunks of the United States, while barring foreign ownership in most areas. If the economic prospects of the United States continue the way they are, we, and especially my generation, are going to find out the hard way that Milton Friedman, NAFTA, CAFTA, and the WTO were all terribly wrong, and that a decade ago, and of all people, well, Ross Perot was right:
Now that Rupert Murdoch owns the Wall Street Journal, the only reputable economic forum left in the western world seems to be The Financial Times of London. The latter ran an article this week by Lawrence Summers regarding Sovereign Funds, and their antithesis to capitalism, and, well, national sovereignty. A sovereign fund is a state owned asset which exists to purchase stakes in private companies. All governments, at least in the industrialized world, do this in one form or another. However, the idea of the sovereign fund as an engine of capitalism becomes something else when paired with an equally strong engine of protectionism. We're seeing this with the emergence of China.
China already has two economic weapons they hold over our heads: they own more of our debt than almost any other country, and in addition, due to our insane conservative trade policies, we can't even manufacture an aircraft carrier without parts they make. The emergence of China in the sovereign fund game has given them a third piece of leverage against us. China has been buying large, and in some instances controlling, stakes in American private equity funds and corporations. On the surface this just seems like the nature of global free trade, but when you consider the fact that China will not allow foreign investors to own even a small interest in any Chinese company, the disparity becomes evident.
It used to seem somewhat over the top to say that China could literally sink the entire United States economy with one flick of the stock ticker, but it's now becoming more and more a cause for concern. China (along with Mexico and Brazil) almost exclusively produces all American steel, textiles, clothing, machinery, electronics, high tech components, and in some cases our food. (Faltering global supplies of grain are another security issue, though one best saved for another post.) I don't want to sound like an alarmist, but considering China controls a vast amount of our economy, commodities, and food supply, if they were to, say, launch a military offensive against Taiwan, we would be almost foolish to intervene.
It's all about ownership. China isn't the only country to take advantage of our conservative ownership and trade policies, while protecting their own country's sovereign interests. The tragedy in Minnesota this week has highlighted the large disregard conservative economics leaves for our infrastructure. From Roosevelt until Reagen, we considered infrastucture akin to national security, and an investment in our nation's future. Now, Spain and Australia own large swaths of U.S. highways and toll roads. We literally pay foreign companies for the privelege of driving on our own American roads. Japan, Saudi Arabia, The United Arab Emerates, and India all also own huge chunks of the United States, while barring foreign ownership in most areas. If the economic prospects of the United States continue the way they are, we, and especially my generation, are going to find out the hard way that Milton Friedman, NAFTA, CAFTA, and the WTO were all terribly wrong, and that a decade ago, and of all people, well, Ross Perot was right:
# posted by Patrick : 8:22 PM
