Reductio redux I

Quite a lot of angst regarding the government’s plan to sell 49% of five state owned enterprises seems to stem from concern at the possibility of some shares being bought by foreigners and the dividends thereby escaping overseas.

This has inspired my next reductio ad absurdum thought experiment.

The competing ideas are:
Foreign investment is unhealthy because the profits go overseas instead of benefiting the local economy
vs
Foreign investment is, on the whole, a good thing

The extremes of both ideas are, on the one hand, a world in which all countries prevent all ownership of all assets by any foreigner, and on the other hand a world in which no country has any restrictions whatsoever on foreign ownership of any asset.

In the former world, capital would be locked into national borders and a country could not develop or grow its economy except through its own resources, or through the benevolence of overseas donors in the form of foreign aid or private charities.

In the latter world, capital would flow with no restrictions in any direction. Savers in one country would be funding economic development in others.

Although in the latter example there would no doubt be examples of foreign investment gone wrong, I cannot conceive of any serious argument in favour of the former world over the latter.

Interestingly, those opposed to foreign ownership of New Zealand assets tend to adopt one of two positions on New Zealand ownership of overseas assets, one of which is contradictory, while the other is merely hypocritical. The first position is that New Zealand funds such as Kiwisaver should not invest overseas on the basis that this money should be being used to grow the New Zealand economy. In other words, when foreigners invest here they do more harm to New Zealand than they do good, and when New Zealanders invest overseas they also do more harm to New Zealand than they do good. These statements cannot both be true, although they can both be wrong. Others, meanwhile, object to foreign investment in New Zealand on the basis that it harms the New Zealand economy, but are quite happy partake in funds that invest overseas, thereby, (in their view) profiting New Zealand and themselves at the expense of other countries. While at least being internally consistent, it is somewhat hypocritical.

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One comment on “Reductio redux I

  1. James says:

    Morons is the word for them I believe…

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