Monday, July 30, 2007

Economic Patriotism 3

In several previous posts I've taken up the theme of "economic patriotism," which might be defined as the notion that at times sovereign interests may insist that the market bend its knee to them. With the market ascendant in recent decades, economic patriots have tended to acquire a somewhat "retro" look, and it has been common to decry the defense of national economic interests as shortsighted and backward. Now we have a cautionary statement from an influential voice generally linked to the market side of the debate: Larry Summers, economist, former US Treasury Secretary, and former president (need I remind anyone?) of Harvard. Specifically, Summers worries about the rise of "sovereign wealth funds," that is, large amounts of cash and securities controlled by states but invested in the market. He writes:

The question is profound and goes to the nature of global capitalism. A signal event of the past quarter-century has been the sharp decline in the extent of direct state ownership of business as the private sector has taken ownership of what were once government-owned companies. Yet governments are now accumulating various kinds of stakes in what were once purely private companies through their cross-border investment activities.

Suddenly French-style economic patriotism is not looking quite so backward. Sarkozy may well derive some benefit for his eclectic approach to markets and globalization from this shifting of the winds.

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