A question of national economic security

I’ve been posting recently on the global backlash against FDI. So, in scanning today’s news, this headline caught my eye: “INTERVIEW-China official slams foreign investment spree.”

Here’s a sample:

Li Deshui, head of the National Bureau of Statistics, called for legislation to curb “ill-willed” acquisitions of domestic companies by foreign firms… Echoing recent concerns over China’s sale of stakes in its major banks to foreign investors, Li said that unchecked acquisitions by foreign multinationals could pose a threat to China’s economic security.

Reading this latter remark made me wonder just how one nation’s “economic security” should be defined. Where does one draw the line? Borders are the obvious place to start, but everyone knows that this is no longer true. The same may be said of nationality.

Let’s face it, when it comes right down to it, when someone (be it a company or an individual investor) stands to lose millions or even billions of dollars on an investment, national economic security goes right out the window along with concern for everything else but one’s own ass.

Think about a bank run: are those people lining up to withdraw their deposits before the next guy concerned with national economic security? Of course not. They’re worried about their own damned money.

I don’t mean to downplay the seriousness of the issue. “Bank runs” on an international scale are exactly what governments are worried about. But they should consider other ways of preventing such things from happening (i.e. better policy or more effective regulation) than by prohibiting them altogether. You don’t deal with bank runs by outlawing banking; you deal with them by creating systems of deposit insurance, by providing lenders of last resort, and by requiring banks to keep a certain percentage of deposits on hand at all times.