The geopolitics of finance

This op-ed by Satvik Varma is a great example of why government and free trade can never go hand in hand-

National security was deservingly one of the common items in the election manifesto across party lines in the recent elections… it is the recent media reports about the proposed National Security Exception Act which is generating concern amongst foreign investors.

It is difficult to comment with certainty on the proposed legislation since its actual text is not available for review. However, it would not be entirely unfair for the government to reserve the right to screen all foreign investments, especially when such review is in the larger interest of national security. The real issue is the process such review will follow.

Based on previous understanding, the proposed National Security Exception Act would most likely be modelled on the Exon-Florio Act, a US legislation first introduced in 1998. At the time of its enactment, it was argued that foreign investments in the United States, which may affect or threaten to impair national security must be reviewed. Accordingly, the US President must have the ability to block investments if they were perceived to pose a threat to national security.

As Varma says, there is a “balance” that automatically has to be considered. Once the state is granted an exclusive monopoly over national security, all “sensitive” deals are subject to government approval. Who would allow a private telephone company run by the Chinese, or the Russians, to operate within their country? Or ports, or major infrastructure projects? Will a country keep quiet if a private uranium mining company sells its produce to an Osama or a Kim Jong Il? What about an organization openly fronting for Osama running an airline company?

The “cold war” may have ended, but the mentality never dies. There will always be some countries, or groups, who have megalomaniacal ambitions. This is the same “systemic risk” argument that statist economists use to push their case for tight regulation of the banking industry – if there exists a possibility, however remote, that your actions can harm me, I need to be able to control that action of yours.

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