Whom to trust?

Harold Meyerson on an increasingly important puzzle – international capital flows controlled by governments:

China just bought itself a $3 billion share in Blackstone, the U.S. private equity firm.

To be sure, the Committee on Foreign Investment in the United States has the power to nix such purchases if they compromise national security. But what is the proper response of laissez-faire advocates to this sudden wave of foreign government investment in non-security-related companies? It’s okay if the Chinese government owns a slice of our economy but not okay if our own government does? We trust every other government more than we trust our own?

I posed this question to William Niskanen, chairman of the libertarian Cato Institute and among the most principled ideologues on our political landscape. Foreign government ownership, he argued, shouldn’t pose a problem unless that government obtains a controlling interest. When I then asked whether it would be a problem for the U.S. government to buy into such a company, he answered immediately, “I don’t think I would want to be a shareholder in a company in which the U.S. government owned a good bit of the shares,” and then, pausing, continued, “I haven’t thought about this” — “this” being the distinction between U.S. ownership and, say, Chinese.

Niskanen is hardly alone. None of us have thought sufficiently about how the belief in untrammeled capitalism could lead to foreign governments, whatever their agendas, controlling more and more of the American economy.

Via Thoma.

Globalization & iPods

Hal Varian in the NYT:

Who makes the Apple iPod? Here’s a hint: It is not Apple. The company outsources the entire manufacture of the device to a number of Asian enterprises, among them Asustek, Inventec Appliances and Foxconn.

But this list of companies isn’t a satisfactory answer either: They only do final assembly. What about the 451 parts that go into the iPod? Where are they made and by whom?

Varian summarizes research (pdf) that traces the production of an iPod across the globe:

Ultimately, there is no simple answer to who makes the iPod or where it is made. The iPod, like many other products, is made in several countries by dozens of companies, with each stage of production contributing a different amount to the final value.

The researchers – Greg Linden, Kenneth L. Kraemer and Jason Dedrick – calculate value-added for each step of the production process. Read the full column.

[HT: Arnold Kling]

Schools of thought

People in the first group have names like Bono, Angelina Jolie, Bob Geldof, Bill Gates, John Edwards, and Jeffrey Sachs. People in the second group have names like Abhijit Banerjee, Tim Besley, Francesco Caselli, Esther Duflo, Lant Pritchett, and Mark Rosenzweig. Guess which point of view gets the bulk of media coverage and of public attention.

Dani Rodrik describes two schools of thought in development economics, and it’s not the hackneyed market vs. state or Sachs vs Easterly dichotomies.

"Colonialism all over again"

A fascinating CSM story on Chinese investment in Africa:

Brad Phillips, director of Persecution International, an aid group working in South Sudan, has seen the destruction firsthand. “The Chinese are equal partners with Khartoum when it comes to exploiting resources and locals here,” he says. “Their only interest here is their own.” He would love to see the Chinese sponsor a school here, he says, or a clinic, or an agricultural program, or “anything for the people.” But there is nothing like that in sight. Just miles of desolate land.

“The Chinese simply do not care about us,” says Martin Buywomo, Paloich’s mayor. “They have no contact. They never even came to my tent to pay respects. They think we are lesser people.” A member of the Shilluk tribe who attended British mission schools, Mr. Buywomo puts down the worn copy of George Eliot’s 19th-century classic “Silas Marner” he is reading and continues sadly. “We see them in their trucks but they overlook us. If they saw us dying on the road, they would overlook us.”

Buywomo rearranges the Chinese-made plastic pink flowers on his desk. “This is colonialism all over again.”

I doubt that US investors like Chevron built many schools or clinics, but accusations of “scorched-earth clearances of the indigenous population” don’t sound good for China’s National Petroleum Corporation. Read the full story.

[HT: Drezner]

“Colonialism all over again”

A fascinating CSM story on Chinese investment in Africa:

Brad Phillips, director of Persecution International, an aid group working in South Sudan, has seen the destruction firsthand. “The Chinese are equal partners with Khartoum when it comes to exploiting resources and locals here,” he says. “Their only interest here is their own.” He would love to see the Chinese sponsor a school here, he says, or a clinic, or an agricultural program, or “anything for the people.” But there is nothing like that in sight. Just miles of desolate land.

“The Chinese simply do not care about us,” says Martin Buywomo, Paloich’s mayor. “They have no contact. They never even came to my tent to pay respects. They think we are lesser people.” A member of the Shilluk tribe who attended British mission schools, Mr. Buywomo puts down the worn copy of George Eliot’s 19th-century classic “Silas Marner” he is reading and continues sadly. “We see them in their trucks but they overlook us. If they saw us dying on the road, they would overlook us.”

Buywomo rearranges the Chinese-made plastic pink flowers on his desk. “This is colonialism all over again.”

I doubt that US investors like Chevron built many schools or clinics, but accusations of “scorched-earth clearances of the indigenous population” don’t sound good for China’s National Petroleum Corporation. Read the full story.

[HT: Drezner]

Keeping China in perspective

The US global trade deficit topped $800billion last year. Even so, the share of this deficit accounted for by East Asia, including China, in the 10 years to 2006 dropped significantly, from 70 per cent to 46 per cent. Meanwhile, the US trade deficit with the rest of the world has ballooned. Over the past decade, it grew by $244billion with East Asia but by $391billion with the rest of the world. Although China needs to apply fairer trading and currency policies, it is being blamed by US lawmakers, unions and manufacturers for some problems that it did not cause and cannot fix.

Michael Richardson also warns that a US-China trade war would cause significant collateral damage to many countries in the Asia-Pacific.

UPDATE: And to keep those numbers in perspective, see Steve Waldman in the comments section. Oil prices are a crucial element of the story.