It would be hard to find a discipline stalked by more fallacy than economics. Many large libraries could be filled with thick books laying out the myriad ways in which the truth about human action is mangled by confused individuals inside and outside the economics profession.
One of the biggest fallacies (or myths) of economics that just won’t die is the one about embargoes, or “unauthorized export.” Supposedly producers of goods and services can embargo certain buyers of same. Except that they can’t. There’s quite simply no accounting for the final destination of any good. Repeat the previous line over and over again. Frame it in the office of every economist, politician and pundit. Doing so would save us from so much mindless economic babbling and statecraft.
Indeed, to this day it’s believed that when they placed an embargo on the U.S. in 1973, the Arab members of OPEC limited the flow of oil into the United States. They did no such thing. Americans consumed more “Arab” oil than ever; only they imported it from those not embargoed by Arab OPEC members.
Still confused? Let’s reduce what’s absurd to the completely absurd. Let’s imagine that the U.S. is 100% bereft of oil within its 50 states, and worse, at war with or embargoed by every oil-producing nation on earth. If so, would oil imports to the U.S. grind to a halt? Actually, not one barrel fewer.
In truth, Americans would continue to consume oil in gargantuan amounts as though the crude had bubbled up in West Texas. The most productive people on earth, Americans would be size buyers of crude from those the oil producing nations were selling to. And there would be lots of sellers. No one would turn their nose up to the largest market in the world. What the oil rich nations wouldn’t sell to us, their customers would. “Basic economics” is redundant.
Which brings us to Keysight Technologies, a Silicon Valley technology company that the Wall Street Journal reports “sold software and equipment to China, Russia, and 15 other countries beginning in 2015.” The Biden State Department fined Keysight $6.6 million for the sales. Why was that?
Apparently its “software can be used to model and simulate forms of electronic warfare.” In other words, the “unauthorized export” to China and Russia is said to have “harmed U.S. national security.” It all makes so much sense…if you’re economically illiterate.
Back to reality, there’s once again no accounting for the final destination of any good. Anything. In the real world of human action, if you’re producing valuable market goods you’re trading with the whole world. By definition. No doubt if it wanted to, Apple could solely sell its next iPhone to individuals with a California driver’s license, but soon enough the phones would be sitting in pockets and affixed to ears around the world. Such is the global excitement about Apple products.
Going back a little over 100 years, during WWI the U.S. “embargoed” Germany. Soon enough, trade between American producers with Scandinavian individuals soared. Coincidence? Not at all. Americans still actively traded with the Germans during the misnamed “Great War,” only they did so indirectly.
Applied to Keysight, the Biden administration’s mugging of the company’s shareholders is more evidence of just how confused the political class is about how the world works. Even if Keysight made a point of refusing to sell to “China” and “Russia,” its technology would still wind up in “China” and “Russia.” So long as Keysight is selling, it can’t control where its products go. If you’re a producer, you’re ultimately trading with everyone.
Translated for those who need it, Keysight can sheepishly apologize or do whatever the small-minded in government make the capable do, it can claim it will never sell to “China” and “Russia” again, but market forces will have the final say. So long as Keysight is producing what the world wants, including those it’s “unauthorized” to export to, its products will find their way into all manner of hands that the members of its salesforce never shook.
In short, the Biden administration’s actions meant to bolster U.S. national security weren’t enhanced one iota by its tactless mugging of Keysight’s shareholders. Keysight was fined for being a good corporation only for the federal government to be rewarded for its success.
Reprinted from RealClearMarkets