You guys think I make this stuff up

We're currently enjoying one of our famous internecine rifts at Three Sources. I think I may be alone in the weeds in my support of the Dubai Ports purchase.

I have some good friends, however, I'd suggest that anybody read Larry Kudlow's blog and either of two editorials in today's Wall Street Journal. the lead editorial shares my concern about a new case for protectionism.

What's especially dangerous here is that we're seeing the re-emergence of the "national security" protectionists. They were last seen in the late 1980s, when Japan in particular was the target of a political foreign-investment panic. The Japanese were buying Pebble Beach and Rockefeller Center, and so America was soon going to be a colony of Tokyo. A Japanese bid for Fairchild Semiconductor of Silicon Valley was seen as a threat to American defense. Those fears seem laughable now. But here we go again, with new targets of anxiety.

Not only protectionism, but why don't we use this as an excuse to let government take over the marketplace. Karl Marx and Republican Rep. Duncan Hunter share that utopian view.

If you think corruption on Capitol Hill is bad now, wait until foreigners need approval from Congress for every multi-billion-dollar investment. The current investment review process was designed by the Reagan Administration to be discreet, and to keep Congress out, precisely to avoid such politicization.

In recent weeks Members of Congress have suggested that the foreign-ownership ban should apply to: roads, telecommunications, airlines, broadcasting, shipping, technology firms, water facilities, buildings, real estate, and even U.S. Treasury securities. If this keeps up, we'll soon arrive at France, where even food and music are "protected" from foreign influences as a matter of national survival.

The larger truth is that the flow of foreign investment into the U.S. is a sign of economic strength, not weakness. For 25 years pro-growth economic policies including monetary stability, steep tax-rate reductions on capital and freer trade have created a giant in-sucking sound of some $4 trillion of global investment into America. Economist David Malpass of Bear Stearns recently calculated that U.S. GDP grew by 100% between 1992 and 2005 while world GDP growth measured in dollars grew by only 70%. Over that same period, the U.S. created four times the number of new jobs as Europe and Japan combined.

So, do I make this stuff up, or dies trade and specialization and comparative advantage and direct foreign investment really make us richer. Here's a graph for me to love -- read 'em and weep, protectionists!

Economics and Markets Posted by jk at March 10, 2006 10:48 AM