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May 9, 2005
Need Some Votes? Blame a Foreigner
Tom Palmer beat me to this story but I'll post on it anyway. Foreign private equity firms, specifically those from the U.S., are under attack by politicians seeking votes in Germany. As a recent Business Week article reported:
Few places have been hit harder by the decline of the German steel industry than Gelsenkirchen, a city of 271,000 in the Ruhr Valley where unemployment, at 26%, is among the worst in the nation. So when Franz Müntefering, chairman of the governing Social Democrats, likened foreign buyout artists to "swarms of locusts sucking the substance" from German companies, that was just what Alfred Schleu was yearning to hear. "It's about time someone told it like it is," says Schleu, local chief of IG Metall, the union that represents 2.4 million workers in industries such as steel and autos...
Schröder & Co. are desperate. Polls show the state will fall to the opposition Christian Democrats in May 22 elections, possibly bringing the end of Schröder's coalition government with the Green Party. "[The attacks] are coming from someone who has his back to the wall," says Peter Hammermann, Munich-based managing director of Barclays Private Equity Co. in Germany. In fact, Müntefering's critique of foreign capital doesn't go far enough for some on the hard left, who pelted him with eggs at a May 1 rally in Duisburg.
Head over and read the whole article for more details, but the subject of the piece got me wondering about another topic. Is it simply a fact of life that politicians can score easy political points by bashing foreigners?
The problem is clearly not confined to Germany. Turn on C-Span and it won't be long before you'll hear Republicans from Sen. Lindsey Graham and Treasury Secretary John Snow to Democrats like Sen. John Kerry and Chuck Schumer blaming U.S. job losses on "Chinese currency manipulation" and "Asian bankers."
The insincerity of their attacks can be demonstrated by asking them a few simple questions.
First off, if China is "manipulating" it's currency by targeting the dollar, what do you propose they target in its place? As the late Bob Bartley pointed out, floating currencies do not represent free-markets. They need to target something in order to control inflation, which China has indeed tamed since they began the dollar policy. So why exactly do they need a new target and what exactly should it be? I doubt any have an answer.
Secondly, politicians are constantly scaring voters with predictions of jobs heading to Mexico, China, or India. But as Dan Griswold at the Cato Institute has pointed out in the past, U.S. companies directly invest more in the tiny Netherlands than the three aforementioned countries combined. Why no mention of the Dutch stealing our jobs? Could it be that a nation of wealthier, predominantly white Europeans doesn't get them the desired effect? You tell me.
As the world becomes more and more intertwined due to globalization you would think this nasty rhetoric would be ebbing, but as evidenced by the above that is far from the case. The sooner people wise up to this nasty political game the better. Instead of looking across the ocean for the source of thier countries' woes, politicians from Germany to the U.S. might finally come to the realization that the real problem lie no further than the mirror.
Posted by Peter Mork at May 9, 2005 10:46 PM
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