Fungible Flunk: John Tamny Deftly Dissects Rep. Mike Gallagher's Stance on U.S. Investment in China

AP Photo/Anjum Naveed

As I have pointed out in this space before, John Tamny, editor of RealClearMarkets, in my estimation, is the most audacious economic contrarian on the scene since the late great Jude Wanniski passed away in 2005. And in his most recent column, John Tamny doesn’t disappoint. 

In his excellent column in RealClearMarkets today, John sets his sights on Rep. Mike Gallagher (R-WI) for his stance against China, arguing that Gallagher's understanding of economics is flawed.  

In keeping with my intent to write more about global trade and tariffs, Tamny’s column today is useful in that regard. His suggestion that Gallagher fails to grasp the concept of fungibility, particularly when it comes to money and global trade, is classic Tamny and well worth unpacking. 

Tamny begins by debunking the myth that the Arab members of OPEC were able to successfully embargo oil from reaching the United States. He explains that oil is fungible, meaning that it can be sourced from various countries and is broadly the same regardless of its origin. Thus, if oil from Arab nations is blocked, it will simply be replaced by oil from other countries. Tamny uses this example to highlight the importance of understanding fungibility in the context of trade and other economic interactions. 

Tamny then turns his attention to Gallagher's views on China. He accuses Gallagher of believing that the Chinese Communist Party (CCP) is somehow different from other government bureaucracies and is capable of out-competing American businesses.

Tamny finds Gallagher's assertions about investing in China baseless and argues that they ignore the principles of fungibility and market dynamics. He especially questions Gallagher's assertion that companies like TikTok and Huawei are controlled by the CCP, pointing out that these companies operate globally and face competition in over 270 countries. 

Gallagher, as many readers know, is convinced that the Chinese Communist Party (CCP) is different; that quite unlike government bureaucrats in every other nation in the history of the world, the members of the CCP (presumably for being Chinese?) are capable of operating world-leading businesses that will rapidly place their broadly free and dynamic stateside competitors in the rear-view mirror. Really, what else could Gallagher mean when he asserts that TikTok is controlled by the CCP in the same sentence in which he asserts that TikTok is soon to be the most dominant media company in the U.S.? And it’s not just TikTok. Supposedly Huawei answers to the CCP, which would make it the first government-controlled business in the history of the world to have its wildly competitive products circulating in over 270 countries.

The column goes on to argue that Gallagher's concerns about American savings funding companies involved in China's military and human rights abuses overlook the fundamental principle of fungibility. Tamny explains that capital seeks returns, and if American savings are not flowing to China, other wealth will likely fill the void. He emphasizes that dollars, being a trusted form of currency, have a global reach and can facilitate commerce around the world. Therefore, attempts to restrict American investments in China would not necessarily prevent the flow of capital to Chinese companies. 

Tamny then challenges Gallagher's call for increased government control over investments in China, highlighting the irony of fighting authoritarianism with authoritarianism. He argues that Gallagher's approach betrays a lack of trust in the principles of a free market and individual choice. Instead of advocating for government intervention, Tamny suggests that the preference for war or harmful gestures against those investing in a country is unlikely, as capital flows indicate a level of interdependence and economic relationships between nations. 

Throughout the column, Tamny repeatedly emphasizes the concept of fungibility and its implications for global trade and investments. He presents a compelling argument against Gallagher's views, highlighting the limitations of a narrow and nationalistic perspective. Furthermore, Tamny makes a persuasive case for the importance of maintaining trust in market forces and individual decision-making rather than relying on government control and intervention. Something that was once taken for granted in the Republican Party. 

In short, Tamny skillfully debunks Gallagher's flawed understanding of fungibility and showcases the unrealistic nature of limiting investments in China. By poking holes in Gallagher's argument and highlighting the irony of fighting authoritarianism with authoritarianism, Tamny has given us a refreshing dose of market wisdom mixed with a dash of dry humor. 

Let's trust in the power of freedom and the right to make our own choices while letting the markets do their thing!



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