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A Parable About ZTE

Caplan-Glaeser Debate: My Open... Safe haven or tight money?...

by Pierre Lemieux

Assume that the state is not a benevolent organization. It pursues its own interests, which means the interests of those who occupy positions of command at its helm. These interests may require it to satisfy the interests of certain electoral or quasi-electoral clienteles whose support is necessary to those in power. Under our assumption, the state will use the rule of law and the constitution as mere commitment devices to gain the confidence of the populace. State rulers will ignore the rule of law when they can get away with it--while proclaiming that "we are a nation of laws."

Let's call H (for "home") the state that rules over the territory where we live. There is of course no reason why a foreign state F would be less self-interested and more benevolent.

One implication is that the state, democratic or not, represents only part of the citizenry; it often discriminates against other groups (although discriminator and discriminated may switch over time and according to who is in power). Another implication is that whether Joe or Jack is the ruler-in-chief will not matter much. The worst of the two might do a bit more damage, which the other one will add to when his turn to rule comes.

Now, suppose there is a foreign company Z that H deems a threat to its security, that is, to "national security." (In this post, any resemblance to an actual company or an actual state is pure coincidence.) Because of this (or other analogous reasons), H has ordered its own citizens to stop doing business with Z, which amounts to a death sentence for the company if the citizens obey. They don't have much choice but to obey their state's orders.

Suppose further that H has started a trade war with F, which is the state that has formal jurisdiction over Z. Perhaps Z is even a state corporation of F. At any rate, the relation between F and Z is symbiotic, for Z also provides political support to F. In the nascent trade war, F has forced some of its own subjects to reduce their imports from producers who are an important electoral clientele of H.

Lenin.jpg What will state H do? (As Vladimir Lenin would say, what is to be done?) Here is a possible strategy suggested by the model above. H could promise to not bankrupt Z provided that F stops hurting H's weighty domestic clientele. Perhaps, who knows, H had purposely attacked Z, or had attacked more brutally, precisely in order to hold its survival as a bargaining chip against F?

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CATEGORIES: International Trade

COMMENTS (1 to date)
Hazel Meade writes:

In other words, H is conscripting it's citizens as weapons in it's conflict with F, by compelling them to participate in inflicting harm on Z. Including citizens who may have no personal beef against F, or who may currently be disfavored and might benefit from a change of power at home.


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