At his blog today, Mr. Paul Krugman writes that
you don’t find people like Christy Romer or, well, me taking positions on policy issues that are directly at odds with what they’ve said in their professional writings.
In his June 27, 2005 New York Times column, Mr. Krugman objected to the Bush administration’s approval of Chinese bids to buy the American companies Maytag and Unocal. He began that column defensively:
Fifteen years ago, when Japanese companies were busily buying up chunks of corporate America, I was one of those urging Americans not to panic. You might therefore expect me to offer similar soothing words now that the Chinese are doing the same thing. But the Chinese challenge – highlighted by the bids for Maytag and Unocal – looks a lot more serious than the Japanese challenge ever did.
So surely the reason Mr. Krugman offered in that column for why Chinese purchases of U.S. companies differ fundamentally from similar purchases earlier by the Japanese is compelling and consistent with his earlier writings. You judge:
One difference is that, judging from early indications, the Chinese won’t squander their money as badly as the Japanese did. The Japanese, back in the day, tended to go for prestige investments – Rockefeller Center, movie studios – that transferred lots of money to the American sellers, but never generated much return for the buyers. The result was, in effect, a subsidy to the United States. The Chinese seem shrewder than that.
Overlook the obvious question of how is it that investors who use assets in ways that prove to be unproductive (that is, “never generated much return”) provide “a subsidy to the United States.” Focus instead on Mr. Krugman’s explanation that he approved of Japanese investments in the U.S. because Japanese investors are dumb, and he disapproves of Chinese investments in the U.S. in part because Chinese investors are smart.
I’ve read many of Dr. Krugman’s academic books and papers and nowhere in these do I find even the faintest hint that a nation is enriched by dumb investors and impoverished by smart ones. True, here I’m only speculating, but I’m quite confident that had Dr. Krugman been asked in, say, 1990 if a nation’s prosperity is put at greater risk the smarter are the people who invest there – or, alternatively, if a nation’s prosperity is more surely promoted the dumber are the people who invest there – he would have answered, unlike Mr. Krugman, with a resounding “No!” After all, Dr. Krugman did serious economics.
In the same June 27, 2005 NYT column (linked above), Mr. Krugman offers a second reason (in addition to the one I mention above) for why he objects to the Chinese buying Maytag and (I gather especially) Unocal. Here’s that second reason:
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….
I leave to the reader to decide if this second reason is at odds with Dr. Krugman’s justly famous warnings against the pop-internationalism notion that nations compete economically against each other, and against his (rather common for a sensible economist) counselling skepiticism of those who raise national-defense concerns as alleged justifications for (as Dr. Krugman writes on page 101 of Pop Internationalism) “a more nationalistic trade policy.”
I leave also to the reader the task of explaining how Uncle Sam stopping the Chinese from purchasing U.S. firms prevents, in any way that benefits Americans economically, the Chinese from competing for scarce resources.