Power & Market

Should We Allow U.S. Land To Be Sold to the Chinese?

Admittedly, this idea sounds bad. Both “sell out” and “selling out” have a bad odor to them. Rather, we should “stand firm!” And there is nothing like perking up that patriotic spirit that compares to bashing supposed foreign enemies. However, there are deep and dire problems with this attempt at demagoguery.

First of all, there is simply no mention in the U.S. Constitution, let alone prohibition of, selling land to foreigners. We have been doing so since practically the beginning of our country. A relatively recent high-profile case in point is the sale of Rockefeller Center in New York City to Japanese interests. This land parcel contains 19 buildings ranging from three stories to sky scrapers, and comprises 22 acres dab smack in the middle of Manhattan. A 51% share was purchased for $846 million in 1989 by the Mitsubishi Corporation. As it happens, this sale did not go all that well for the buyers; they sold out in 1995 for a loss (but that is entirely beside the point). If the U.S. Constitution prohibited sales of this sort, this one never would have occurred.

Second, according to one opponent of such sales, a Republican candidate for Governor of Washington state:

“The practice of selling American land to anyone other than American citizens is heinous and unconstitutional. American soil belongs to American citizens. End of discussion.”

Did you notice anything missing from this harangue, apart from a failure to mention which part of the U.S. Constitution is of relevance? In most sales, nay, all sales without exception, there is a buyer and seller. So far, so good. There are these two countries. But there is also a price! What is the price the Chinese are willing to pay for our precious farm land? Typically, fertile agricultural acreage sells for about $3,800 per acre in the United States. Well, suppose the people of the Middle Kingdom offered double that amount, or $7,600 per acre. Then, the likelihood of Americans going without “access to reliable and sufficient quantities of affordable, nutritious food” would be decreased, not increased, by all such sales. American farmers could then purchase twice as much arable land in nearby Canada or Mexico; they would be enriched, and we would have more food rather than less.

Here is a multiple-choice question for those of you who have not yet had Economics 101: are the Chinese likely to offer less than $3,800, that exact amount, or more than that figure, for their average purchase? Go to the head of the class if you selected that latter option. For an explanation: with these new offers for our terrain, the demand curve for it will shift to the right and prices will tend to be higher, not the same or lower. Maybe not double, as in this example, but higher!

Should we sell the entire country to the Chinese? It all depends upon what they offer for it! If it is the sun, the moon, and the stars, then yes. If it is eternal life, plus the entire remainder of the planet, including China itself, then, again, yes, of course. Without knowing what the precise financial and otherwise offer is, it ill behooves anyone to reject any deal!

Third, according to that old folk wisdom, if goods don’t cross borders, armies will. Farm land is not usually thought of as a tradeable good, but it is. The United States is now confronting China in a myriad of ways. Both are nuclear armed. Do we want to exacerbate tensions between these two military giants, or dial them down a notch? There can be only one sensible answer to that question. A nuclear conflagration can ruin your entire day!

What about the lack of reciprocity? Posit that China refuses to allow Americans to purchase land in their country. Should we follow that pattern and ban the sale of our real estate to them? This might be psychologically sound but makes no economic sense. Bob and Allen have a good commercial exchange in product X. Each benefit from it. But Allen refuses to engage in a similar manner regarding product Y. Would Bob benefit from cutting off trade with Allen in X? Of course not. We are positing that both benefit from buying and selling X. If Bob does so, he is cutting off his nose to spite his face, as that old adage states. Ditto for U.S. and China relations.

Let me try again. Two men are sitting in a wooden rowboat. The first one shoots a hole in the hull. Water starts seeping in. Should the second one shoot yet another hole in the boat to get even with his fellow passenger? Not if he has even a modicum of rationality. Yes, China should allow Americans to purchase land there too. And, perhaps, they will one day do so if the advice by candidates like the one above is soundly and widely condemned.

Remember, we invaded their country in the past (and not only tried, but succeeded in shoving addictive drugs down their throats). They never returned the “favor.” They have more of a right to be suspicious of us than we of them.

For the record, I acknowledge that the U.S. government should not be selling land to anyone else. They never homesteaded any of it. They are not the proper owners of any of it. We are here discussing, only, private land sales, as in the case of Rockefeller Center.

Originally published by The Libertarian Institute.

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