Is Paul Krugman now a mercantilist?

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…

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 – which makes last week’s other big Chinese offer more than just a business proposition…

Unocal sounds, in other words, like exactly the kind of company the Chinese government might want to control if it envisions a sort of "great game" in which major economic powers scramble for access to far-flung oil and natural gas reserves. (Buying a company is a lot cheaper, in lives and money, than invading an oil-producing country.) So the Unocal story gains extra resonance from the latest surge in oil prices.

If it were up to me, I’d block the Chinese bid for Unocal.

I suppose at this point I must vote "yes, he is a mercantilist," but decide for yourself, here is the full piece.  Here is my earlier post on whether Chinese raw material demands hurt the U.S., an application of the theory of comparative advantage.  Here is one of Krugman’s earlier essays on free trade

Addendum: Here is Don Boudreaux with some excellent points and a great link to Sebastian Mallaby.


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