2. Chinese Chief Planner Ma Kai’s notion (quoted by Kahn) of how China should address the economic costs of price spikes seems glib. If the Chinese are overpaying for their overseas energy assets there are no foreign-sourced ‘profits’ to balance against its higher import bills when the spikes occur.

The rest of the debate has been illuminating—head and shoulders above most blog discussions that run to 80 comments—and I’m glad folks have stuck with it even after it fell off the front page.

Except that Unocal is hardly a sister. More of a second cousin, possibly once removed. If the USSR had been buying up Treasuries at the rate that the Chinses central bank has been buying them, that probably would have been a cause for concern, too. If a Soviet company had bought IBM’s PC division, that might have sparked worries as well. And so on. I don’t think the analogy applies very well.

Chinese sage, him say: the journey of a thousand miles begins with one step. If American policy is to ensure that China does not win significant clout in energy markets the obvious way to do that is to make no concessions, not even small ones.

Japanese semiconductor companies in the mid-1980s were in a much better position to push people around, since they had close to a monopolistic position at one point in time. (Krugman, of course, dismissed those concerns as unimportant—for good reason.)

The raw material for semiconductors is sand. That makes a difference. Anyway, who says Krugman wasn’t a realist (sorry, an ORT) even then? According to Jagdish Bhagwati, the reason the Clinton administration finally toned down the Japan-bashing was that the Pentagon told the Commerce Department to stop messing with a vital ally. I can’t imagine Krugman saying: no, guys, this isn’t about politics. His focus was on the economics, but he could quite justifiably have said that the politics were lousy also.

Needless to say, the OPEC embargo in 1973 is not an example of successful political pressure.

That’s debatable. Some Israelis believe that the oil-shock cost them European support. It’s a complicated story which might have ended very differently if Nixon had been in a position publicly to express his private feelings about Jews, or if Americans had been as dependent on oil imports as they are today. Oil has never been enough to give the Arabs real clout, but that’s because they have never had much else. Anyway, you are asking a lot when you ask for an example of an oil-producing state pushing another state around without the threat of force. In ORT, those who can threaten, do so; those who can’t get pushed around. Put it like this: if the USSR had owned the Seven Sisters, wouldn’t that have worried Nato?

Finally, to return to where we started, there is no way anyone who adheres to John Mearsheimer’s view of the world can reasonably be called “liberal.”

Maybe not in American English. On this side of the pond the term has different connotations. But your contention is not merely that Krugman is not the brand of liberal you presumed him to be, but that his views on how to play the Chinese oil game are inconsistent with his views on how to play the Japanese chip game. You are wrong, because the two situations are very different. As Samuel L. Jackson would say, it’s not the same ball-park; it’s not even the same sport.

For the Unocal purchase to be strategically dangerous to the U.S., it would have to give China, by virtue of owning Unocal’s reserves, meaningful market power. (It has to be market power because we’re talking about the impact of the ownership of a commodity.) There is no evidence that it does, or could ever do, anything of the kind. In fact, from a strategic point of view, Japanese semiconductor companies in the mid-1980s were in a much better position to push people around, since they had close to a monopolistic position at one point in time. (Krugman, of course, dismissed those concerns as unimportant—for good reason.)

I’ll actually go further and ask this question: is there any example, in history, of an oil-producing state successfully pushing another state around to achieve strategic geopolitical goals (without, that is, using military force or the threat thereof)? I presume there is, but if someone could actually provide a real example, I’d appreciate it. (Needless to say, the OPEC embargo in 1973 is not an example of successful political pressure.)

Finally, to return to where we started, there is no way anyone who adheres to John Mearsheimer’s view of the world can reasonably be called “liberal.”

The productivity of the average American worker is determined by a complex array of factors, most of them out of reach of any likely government policy. So if you accept the reality that our “competitive” problem is really a domestic productivity problem pure and simple, you are unlikely to be optimistic about any dramatic turnaround. But if you can convince yourself that the problem is really one of failures in international competition – that imports are pushing workers out of high-wage jobs, or that subsidized foreign competition is driving the United States out of the high value-added sectors oil business – then the answers to economic malaise may seem to you to involve simple things like subsidizing high technology the energy sector and being tough on Japan China.

Does the revised version look to you like something Krugman would publish?

As to IR realists, John J. Mearsheimer calls his doctrine offensive realism theory, so if you prefer to call these guys ORTs that’s fine by me. Henry has summarised the viewpoint pretty succinctly. According to ORT, America is an “offshore balancer” whose game-plan is to curb Chinese expansion by supporting the weaker regional powers, principally Japan, India and Russia by all available means. That surely includes ensuring that Chinese oilmen are in no position to push them around.

I am neither defending ORT nor attacking it, only saying that it isn’t inconsistent with Krugman’s economic views. He isn’t the first liberal Keynesian economist to display a hawkish streak; his mentor James Tobin gave Eisenhower a hard time over the (mythical) missile gap.

Speaking of tendentious, let’s ditch the description “realist,” as if those of us who don’t believe that China cut us off our oxygen are “unrealists.”

I’m not sure that’s “mercantilism,” but I don’t know the formal definition.

The term that seems to fit best is informal empire. Britain had one, America has one, China wants one. While we are on the subject of terminology, the doctrine which Krugman was attacking in the early 1990s wasn’t usually called mercantilism (by him anyway). He called it competitive internationalism or Pop Internationalism (the title of his book on the subject). If Steve Carr is right and Krugman has now become a pop internationalist, it ought to be possible to demolish his argument by taking his own words and substituting China for Japan, oil for HDTV. I’ve had a go but it doesn’t seem to work. The argument just isn’t the same. You can be a free-trader, and even a believer in the free movement of capital, and still be a hardline IR realist, without contradiction. No surprise there; the Victorian Brits, in many cases, were all three.

This is why economists are not allowed to make all decisions (as Crooked Timer correctly pointed out to begin with): there are other issues than promoting trade.