Saturday, July 02, 2005

Strategic Rivals

Alex Tabarrok has whipped himself into a froth over a recent Paul Krugman column occasioned by the Chinese bid for Unocal Krugman: Illiberal Demagogue. I've linked approvingly to his stuff in the past so it pains me to say that his post is total crap, and dishonest crap at that. His agrievement:

Paul Krugman used to be a liberal economist; no longer. His abandonment of economics has long been plain, Krugman's abandonment of liberalism was announced in yesterday's commentary on China.

What really upset me about Krugman's column is not the bizarre economics but the illiberal politics...
In support of the charge of his second sentence, he invokes this (in my opinion, totally dishonest) "Open Letter" posted by Arnold Kling.

So never mind that first slander, lets get on to what really gets Alex's panties in a knot:

In the last twenty years China's economic growth has lifted hundreds of millions of people out of poverty and nearly unspeakable deprivation. China's abandonment of communism is one of the great humanitarian events of all time. And what does Krugman have to say about this improvement in well being? (I paraphrase).

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

Where I come from, this kind of "paraphrasing" is called lying. Krugman says nothing like that - please read and decide for yourself. I do agree that China's adoption of Capitalism has had a lot of benefits, but we need to remember that China's capitalism is a totalitarian, essentially fascist, version of capitalism.

So what did Krugman really say to provoke Tabarrok's frenzy?

China, unlike Japan, really does seem to be emerging as America's strategic rival and a competitor for scarce resources...

To Tabarrok, this invokes hideous demons of mercantilism and imperialism. To me, it's a recognition of an extremely obvious fact of human existence - nations do compete for control of resources, and those that lose out, die out. He concludes with a nice sentiment from Adam Smith, advocating the advantages of all living and trading peacefully, a sentiment that I'm confident that Krugman shares with Adam, Alex, and the Pig. I'm pretty sure that Smith's sentiment did not include collaborating in your own destruction. If you are playing nice and the other guy is playing a fiercer game, guess who loses. Krugman's conclusion, which, by the way, is much more about the deficiencies of the current American government than about China:

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.) So the Unocal story gains extra resonance from the latest surge in oil prices.

If it were up to me, I'd block the Chinese bid for Unocal. But it would be a lot easier to take that position if the United States weren't so dependent on China right now, not just to buy our I.O.U.'s, but to help us deal with North Korea now that our military is bogged down in Iraq.