Political Staples

And here is the conclusion of the Guest Rant.

8. Failure to distinguish between deficit and debt
Debt is the total amount a government owes, a deficit is the yearly amount by which revenue was less than spending, which tends to become part of the debt. News stories often don’t make clear distinctions between the two. This can be particularly misleading, if, for example, it’s reported on that “Paul Martin killed the deficit” but it’s not stressed that the huge debt is still there, and program spending is increasing with minimal effort to reduce the debt and the associated interest costs.

9. "China needs to secure resources to feed its economy"
Before I get into my main comment here, an aside: There is a primitive notion that nation states are like teams in some global sporting event. China is seen as an entity that confusingly mixes the totalitarian-regime-turned-incipient-robber-barons that control it and the businesses based there, some of which are viable on the world stage and others are state-backed messes. Team China then goes about “securing” resources by attempting to purchase Noranda, Alberta oil sands interests and Unocal. I must confess that I don’t have a strong opinion about whether such deals should be allowed. Part of me wants to let the market go, another part is horrified by an opaque regime with little regard for freedom and human life purchasing good companies in the west. Ultimately, I think that integration of Chinese businesses in the world economy will benefit everyone, but there will be some unpleasant wrinkles along the way. Perhaps in some instances, the most economically efficient use of resources will be achieved by formerly proud western companies getting broken apart by Chinese buyers. And the highly educated senior members of the Chinese Communist Party will profit handsomely, and likely with more finesse and sophistication than the Russian oligarchs. But back to the main comment: whether good or bad, these purchases of non-Chinese resource companies do not “secure” the resources, unless perhaps these purchases were concurrent with Chinese military occupation of the same resources. Minmetals said that Noranda would be run as a commercial entity. So why can’t China just buy minerals from various commercial entities, such as Noranda? Buying Noranda doesn’t “secure” access, unless a military corridor is created with a fleet of ships across the Pacific, with a heavily guarded Chinese zone extending from Vancouver to Sudbury. Yes, owning the resources could lead to some cost savings, but this would imply running Noranda as an at-cost provider to Chinese entities, not as a commercial entity that happens to be owned by Minmetals. If China wants to secure resources and operate as part of the global economy, all it needs to do is contract for mineral supply with miners and other counterparties. In the absence of military force, this is as secure as owning a mining company and less risky. I don’t know what these various Chinese entities intend by these purchases, but what I do know is that the description of the rationale in most news articles is completely illogical.

10. Perception that the global economy is a zero-sum game
This is a bit related to the protectionism thing. Many people think that if one country’s standard of living improves, another’s must worsen. Wrong. This could happen, but the pie is constantly growing. Last time I checked, global GDP has overall increased over the last few millennia. There are some wins and losses, but net wins are possible and in fact have been the overall norm throughout human history. Wealth is simply improved access to resources, which includes physical resources as well as less tangible things such as more free time because more efficient technology frees us from drudgery such as threshing wheat by hand. Globalization and free trade allow the efficiencies to take place. Trade is good. I can do one thing better than someone else, who in turn does something different better than me, we agree to focus on our strengths and then trade, which is a very fair way of sharing the resources. If prices aren’t attached to goods and resources aren’t distributed through a market mechanism, how are the decisions made? On the basis of ethnicity, military force, anarchic free-for-alls, or the sombre advice of Maurice Strong? Give me, and for that matter give everyone, a market and you’ve given them their freedom.

Sources and inspirations: 1) Larry Smith, Economics Professor, University of Waterloo; 2) Terrence Corcoran and Peter Foster of the Financial Post; 3) Bjorn Lomborg’s Skeptical Environmentalist; 4) any economics textbook; 5) elementary logic.