Some call it treason – Econlib

It has been disheartening to see that the lessons learned in the first half of the twentieth century have now been forgotten as nationalism is on the rise in many regions. And now we are seeing a repeat of the McCarthyism of the early 1950s. Here is Foreign policy:

Not long ago, consulting firms and other information brokers could easily collaborate with different clients in different countries. Just as they spoke to competing companies, they advised competing governments. When senior McKinsey partner Lola Woetzel hoped in 2015 that the think tank’s book would “provide useful input for the planning and development of Chinese technology companies and government agencies,” she probably didn’t think she was making a controversial statement.

But what may have seemed banal at the time can now be portrayed as evidence that corporations are aiding the enemy.

Senators Marco Rubio and Josh Hawley have suggested that McKinsey has helped America’s enemies and that he should not receive federal contracts. This is from Marco Rubio’s website:

Although the report was written in the staid language of management consulting, it was ultimately an effort to help the Chinese Communist Party (CCP) dominate the United States and other countries in breakthrough areas including cloud computing, the Internet of Things, big data , mobile internet, robotics, 3D printing, advanced materials, autonomous vehicles, artificial intelligence, non-conventional oil and gas, electric vehicles, energy storage, renewable energy and human genomic technology. The consequences go beyond economic competition. The report notes that technologies such as these “will have a major impact on future wars and the development of the national defense industry.”

The logic of globalization is that international trade and investment is a win-win process; both parties benefit from it. But when globalization is replaced by nationalism, economics becomes a zero-sum game. Any improvement in the Chinese economy is seen as a negative for the US, as our relative position in the international power rankings declines. So any company that trades with “the enemy” runs the risk of being considered treacherous.

Ironically, Foreign Policy reports that the most inflammatory accusations against McKinsey involve language suggesting that China would benefit from moving in a more communist direction:

The Financial times reported that their Chinese branch had boasted of its economic advice to the Chinese central government in 2019, while a McKinsey-led think tank was preparing a book in which advised China to “deepen business-military cooperation and drive foreign companies out of sensitive industries.”

In fact, China’s rise as a major power began when the country left Maoist-era communism behind. After 1978, China began to allow more foreign participation in its economy and many companies were privatized. If you are an American nationalist, you should welcome China’s return to a state-run model, cut off from foreign investment.

But the bigger problem with this new McCarthyism is that it inevitably leads to a greater risk of war, because states no longer see each other as mutually benefiting from economic growth. In the 2000s, Chinese growth was seen as good news for the American economy, and American companies quickly expanded their sales in that fast-growing economy. Today, many people in America view Chinese economic growth as a threat, and anyone who helps the Chinese economy is seen as a traitor to the US.

I do not accept the nationalist framing of international affairs. But if the senators really believe their theory, they might consider awarding the Congressional Medal of Honor to McKinsey executives for encouraging China to move in a more statist direction. Instead, they should direct their anger at people like me, who have led conversations in China that have encouraged things like free market reforms, fiscal austerity, and nominal GDP targets. These ideas would actually make China’s economy stronger. If trying to improve the economy of a country of 1.4 billion people makes someone a traitor, then I am guilty of treason.