Capital Controls Come to America

Remember when everyone believed that the USA was a free market economy that pushed for free trade all around the world because it was mutually beneficial? Yeah, those days are over now. This is additional evidence – not that any more was needed – that the free trade critics were correct all along.

On Friday, the Wall Street Journal reported that Washington is planning to outlaw American investment in the high-tech sectors of rival economies, citing sources and reports from the US Treasury Department and Commerce Department relating to the proposed regulation.

Sources close to the formulation of the new regulations said the restrictions will primarily be aimed against China and will likely focus on private and venture capital investments in the semiconductor, artificial intelligence, and quantum computing sectors

The Wall Street Journal noted that the reports did not specifically name countries which will be affected by the new regulations, nor did they single out the specific economic sectors which were being identified as being of particular risk to US economic security. However the reports indicated that the regulations will seek to target sectors which might increase the military capabilities of nations that rival the United States.

As one example, a report from the Treasury Department, noted that the new rules on foreign investment would focus on “preventing US capital and expertise from being exploited in ways that threaten our national security while not placing an undue burden on US investors and businesses.”

The new regulations have reportedly been in the works for months, while the US Treasury Department sought to craft the rules so as to be strictly focused on national security issues, while not being arguably designed to foster unfair economic advantages.

It will be interesting to see how a “rival economy” is defined. And it’s even more interesting to see decades of free trade propaganda abandoned overnight.

On the grand historic level, however, this is another bad sign for the survival of the USA as a unitary political entity. Empires that are forced to engage in capital controls in order to prevent money from being invested elsewhere usually are not empires that survive very long.