To 'Counter' China's Growing Economic Might, Congress Throws Away $60 Billion

Story Stream
recent articles

Recently the New York Times reported that there are 3,400 Starbucks stores in China.  Though Starbucks is a Seattle-based company, demand for all things American in China is endless.  That’s why the coffee chain isn’t stopping at 3,400.  It plans to double the number of China locations to over 7,000. 

Starbucks’ expansion came to mind recently while reading in the Wall Street Journal about how the “U.S. is finalizing plans to double funding for big infrastructure projects around the world, seeking to counter China’s growing influence.” Notable here is that a Republican-controlled Congress represents the Washington muscle behind this attempt to “boost the U.S.’s role in international development.” It’s all a reminder that the association of “Republicans” with “limited government” and “austerity budgets” is one of the more successful media-driven con jobs of modern times. 

If only Republicans were careful with our money.  In truth, they’re just as wasteful as the Democrats.  They simply have different priorities.  In this case they intend “to go toe-to-toe with China in offering countries financing options for major infrastructure and development projects.” As Republican congressman Ted Yoho explained it to the Journal, “People are waking up to what China is doing and see that we have to counter that.” As a consequence of Yoho and other Republicans’ eagerness to speak for every American with the money of others, Congress will back prodigal government creations like the Overseas Private Investment Corporation (OPIC) with $60 billion so that they can mimic the Chinese government’s global waste.   

How we know the Chinese government is wasting money overseas is simple: governments cannot be successful capital allocators.  They couldn’t be even if it were Warren Buffett and Jeff Bezos putting the money to work.  Stating what should be obvious, investment is only investment when failure informs the investment equation. 

Buffett and Bezos have overseen countless investment mistakes over the years that cost billions of dollars, and they’ve acknowledged as much.  That they have vivifies why they would be lousy investors if allocating federal dollars.  Since politicians rarely allow bad ideas to die, the inevitable mistakes committed by Buffett and Bezos would never be mothballed. This would be true even if they wanted them to.  You see, in government all bad ideas develop employed constituencies that rely on the perpetuation of what the markets have rejected. Governments theoretically have unlimited funds to waste on what makes no sense, thus perpetuating what investors would sunset rather quickly in the private sector. 

Implicit in the comically delusional notion of Congress boosting “the U.S.’s role in international development” is that profitable investment is easy.  Except that it isn’t.  Ask Buffett and Bezos.  Their immense wealth is a reminder of how supremely difficult it is to consistently invest successfully, yet Republicans who should know better are ready to breezily hand OPIC and other entities tens of billions to mis-allocate.  It would be funny if it weren’t so sad, and if it weren’t our money. 

To all this, some will respond that Congress is not directing $60 billion toward the corporations of tomorrow as much as it will copy China’s “One Belt, One Road” initiative with an eye on infrastructure investment.  Except that any attempts to differentiate infrastructure and corporate investment amount to vainly drawing a distinction without revealing any real difference.  If anyone doubts this, please e-mail me with your certain predictions about what U.S. cities and states will grow the most in the next fifteen years…Before answering, you might stop and think for a bit. And think some more.

Lest you forget, early in the 21st century the Internet was essentially dead.  So bad had the vast majority of once high-flying Internet investments turned out that the halfwits populating Congress were aggressively interrogating Wall Street for allegedly foisting these companies on hapless investors.  Investment and human capital rapidly exited Silicon Valley at the same time that it departed Seattle.  Amazon’s shares had plummeted from over $100 to the single digits, while Microsoft sat somewhat immobile after the Department of Justice attempted to wreck it for being too successful.  Goldman Sachs went so far as to close its Menlo Park office. 

Fast forward to the present, and the five most valuable companies in the world are based in either Silicon Valley or Seattle.  This is important mainly because if Congress had attempted to fund infrastructure projects in 2001, northern California and the Pacific Northwest would have been among the last places they would have thought to “invest.” And this was in the United States where our legislators might have a reasonable understanding of trends.  Does anyone think that a government logically incapable of investing stateside would have a good sense of the global locales in which to put money to work?

Republicans who claim an interest in fiscal responsibility should keep all of this in mind as they reverse what would have been a wise decision to shut down OPIC altogether.  With the latter revived, we face a scenario whereby political appointees working free of crucial market boundaries are set to mis-allocate enormous wealth on the faulty assumption that doing so will boost U.S. “influence.” More realistically, what will most certainly fail will make a great country look stupid. 

As opposed to something that can be bought by politicians shielded from market realities, “influence” is earned through the marketplace.  Starbucks and other U.S. companies have global heft not thanks to federal waste, but because they’re meeting customer needs in ways that the feds could never hope to.  

Good ideas quite simply don’t need government support.  At the same time, bad ones will ultimately be revealed as bad no matter how much of your money is wasted on them.  The feds are set to waste $60 billion on what is a rather blind speculation.  

John Tamny is editor of RealClearMarkets, Director of the Center for Economic Freedom at FreedomWorks, and a senior economic adviser to Toreador Research and Trading ( His new book is titled They're Both Wrong: A Policy Guide for America's Frustrated Independent Thinkers. Other books by Tamny include The End of Work, about the exciting growth of jobs more and more of us love, Who Needs the Fed? and Popular Economics. He can be reached at  

Show comments Hide Comments

Related Articles