Tyler Cowen suggests that Paul Krugman is now a mercantilist. Tyler’s evidence – and powerful evidence it is – is Krugman’s column in today’s New York Times. In this column, Krugman argues that Uncle Sam should prevent the owners of the Unocal, an oil company headquartered in the United States, from selling their company to the China National Offshore Oil Corporation (CNOOC).
Krugman’s article is full of bewildering claims, not least of which is his explanation of why Japanese purchase of U.S. corporations and real-estate in the late 1980s is not a relevant precedent for assessing the merits of Chinese purchases of U.S. assets today:
One difference is that, judging from early indications, the Chinese won’t squander their money as badly as the Japanese did.
In other words, the late-1980s Japanese purchases of assets from Americans were okay because the Japanese were irresponsible spendtrifts. The Chinese, in contrast, are shrewder than the Japanese (so argues Krugman). Therefore, Uncle Sam should police more diligently against acquisitions by the Chinese of dollar-denominated assets.
An interesting theory: the more irresponsible are foreign bidders for dollar-denominated assets, the more sanguine we should be about their attempts to buy dollar-denominated assets.
I wonder if the same principle applies to domestic bidders for dollar-denominated assets.
Anyway…. for a far-better analysis of CNOOC’s bid for Unocal, see this column in today’s Washington Post by Sebastian Mallaby.