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The Limits of the Free Market - National Security

by Chauncey Tinker – 31 Jan 2019

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Although I believe in the free market as a general principle, I do not consider myself to be a libertarian, rather I am a conservative (with a small c). It seems to me that those who are ideologically obsessed with free markets to the point of wanting a truly globalized free market in all industries are ignoring some very real and obvious problems. In this first post in a series “The Limits of the Free Market” I will take a brief look at the question of national security.

A number of recent news articles have revealed a disturbing trend – growing foreign ownership of industries that are vital to our national security. If the foreign powers involved were our friends and allies it might be somewhat less concerning, but unfortunately states are involved who I really don’t think we can consider as such. Take for example this article in the Telegraph (last week):

Britain’s nuclear industry is falling inexorably into Chinese hands

Foreign involvement has also been increasing in the telecommunications sector. From the Guardian (from last year):

China’s ZTE deemed a ‘national security risk’ to UK

From the Telegraph:

Vodafone ‘pauses’ use of Huawei kit in core networks amid espionage concerns

In our increasingly interconnected world, control of communications infrastructure is surely vital to national security.

Fortunately the US under President Trump appears to be waking up to the problem. From the Telegraph:

US charges Huawei with fraud for violating Iran sanctions and stealing trade secrets

Is it not time that the UK started to also look after its own national security interests a bit more carefully? Perhaps wiser heads are starting to prevail in some industries at least, as this article from the Express may suggest:

BT rips out Chinese Huawei equipment from UK telecom network amid growing security fears

According to the above article, Huawei was founded by a former People’s Liberation Army officer and the head of MI6 has asked whether we are comfortable with the use of Chinese technology in this sector.

I suppose there might be an argument that globalized ownership might actually REDUCE the risk of international conflict, a state that owns assets in another state might be less likely to attack that state. However in a time of real conflict I think such mere commercial considerations would be unlikely to hold much sway. We don’t exactly want to become hostages to a potentially hostile power either.

If we can agree that some sort of legislation is needed, then there are two questions in my mind:

  1. Should we have a law against all foreign ownership of assets vital to our national security, or against foreign ownership of assets vital to our national security by states deemed to pose a significant threat?
  2. The second question is, exactly which assets should we consider to be vital to our national security? The defence industry is an obvious one, but it seems to me probably energy and telecommunications would also be candidates since an enemy state with control over these industries could easily create havoc if they wanted to.

For 1., I would say that which states are considered friends can vary over time, and putting states in a category that essentially says “we don’t trust you” could harm diplomatic relations. It might be better therefore just to say no foreign involvement is allowed in those assets whatsoever.

For 2., I would say that probably defence industries, energy, and telecommunications should be considered vital for national security. Of course industries vital for defence such as steel and coal were nationalized in the past, but we managed to get through 2 world wars before this nationalization took place, so I don’t think that industry should be nationalized for national security reasons.

Any thoughts on this?

ELSEWHERE ON THE WEB:

From City AM:

Enter The Dragon: Why China is snapping up British assets

From the BBC:

What does China own in the UK?

What do you think? Please leave a comment below.

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