Working Papers

Krugman Makes New Lows

Alex Tabarrok points to Paul Krugman’s continuing intellectual implosion.

posted on 29 June 2005 by skirchner in Economics

(1) Comments | Permalink | Main

| More


Come off it, Krugman is not a mercantilist. His basic international trading and financing philosophy in respect of the “economic” corporate purchase of Maytag is laissez-faire:

There’s nothing shocking per se about the fact that Chinese buyers are now seeking control over some American companies. After all, there’s no natural law that says Americans will always be in charge. Power usually ends up in the hands of those who hold the purse strings…And we should be relieved that at least for now the Chinese aren’t dumping their dollars; they’re using them to buy American companies….
That doesn’t mean that America will lose from the deal. Maytag’s stockholders will gain, and the company will probably shed fewer American workers under Chinese ownership than it would have otherwise.


Shicking stuff!
Compare Krugmans actual words to Tabarrok’s travesty of a paraphrase:

‘Watch out.  Now is the time to panic. Their gain is your loss.’.


Krugman points out that there is a difference between Maytag and Unocal since there is an obvious national security risk of letting the PRC get control of a major US oil company right now, when US military control of this region is weakening, with US oil supplies are running out and global oil prices are rising.

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….Unocal sounds, in other words, like exactly the kind of company the Chinese government might want to control if it envisions a sort of “great game” in which major economic powers scramble for access to far-flung oil and natural gas reserves. (Buying a company is a lot cheaper, in lives and money, than invading an oil-producing country.)

Behind this philosophy lies the real political truism that global oil companies, unlike widget manafacturers, have a strategic as well as economic, function. Anyone who denies this is talking through their hat.

I like the guys at marginal revolution. But they are engaging in partisan points-scoring here.

Posted by Jack Strocchi  on  06/29  at  06:41 PM

Post a Comment

Commenting is not available in this channel entry.

Follow insteconomics on Twitter