Shame on You, Pols!

US politicians have once again proven that politicians everywhere are more interested in short-term political gains rather than the long-term interests of the country and the world. By interfering with Dubai Ports World's purchase of P&O under the guise of national security, they have raised serious concerns over the rise of protectionism in this country, especially coming after the hoopla over China's CNOOC trying to buy Unocal.

"But what about national security?" 80% of US ports are operated by foreign entities. That number is 90% in the UK, incidentally. So why the uproar now?

"Because now the entity is a foreign government" There's never been a good reason why there should be an issue with a state-run entity as opposed to a foreign corporate body. But ignore that for a moment. The reality is that we already have foreign state-run operators in this country. Didn't hear that in the soundbites, did you? Well, port terminals in Oakland, LA, Seattle and Alaska are run by a company majority-owned by Singapore. What's that you say, Singapore is a friend? Well, then how about the fact that the Port of Long Beach is OWNED by COSCO, an entity of the People's Republic of China?

But this deal is bad not just because a company based in an ally country has been wronged. It's bad because it sends a message, after the Unocal deal, that we aren't so sure about allowing foreigners to buy our assets. As one guest on the McLaughlin group, a brilliant journalist with the United Press International (whose comments I intend to post once the transcript is up) pointed out, beggars can't be choosers. Our lifestyle is funded by an incredible trade deficit, which means that the Chinese and Arabs and all those people who we buy things from are stuck with dollars. But the moment they try to buy anything with those dollars, we freak out.

A great example of the size of our trillion dollar current account deficit was from econoblogger Brad Setser:

So it is not at all unreasonable to say that financing the US current account deficit requires that the US raise $20 billion a week, whether by selling debt, selling stocks or selling off real US assets. That is equal to selling one Unocal a week to China (CNOOC was willing to pay $20 billion). Or selling three companies the size of P&O to the Emirates a week.

If Congress were really serious about port security, they would look into the fact that so few containers go through any kind of inspection, including one of its manifests! It would invest in upgrading port systems, where due to unions, many times information has to be manually retyped to keep people employed. But these don't fit in soundbites. It's much easier to come on TV and be outraged that an Arab company is buying our ports.

I have sometimes felt people in a democracy deserve the pain they get. When voters vote based on emotion and rheoteric, they are stuck with inept populists who do little to improve the lot of their people. I grew up seeing this in India, where pols prefered to promise state-subsidized rice at $0.04/kg than invest in infrastructure. Alas, the beacon of hope in the capitalist world has stumbled a little by falling prey to the same emotional vagaries!