The New Bogeyman: Foreign Direct Investment

Abstract

THE NEW BOGEYMAN: FOREIGN DIRECT INVESTMENT Jahangir Amuzegar lately, the surge of foreign direct investment in the United States has become a major cause for concern in some American political and business circles. Worried voices have been raised about the growing magnitude and variety offoreign ownership in certain industries and localities. Press headlines like "Who Owns America?," "The Selling of America," "A Nation of Tenants," and "Buying America on the Cheap" have added to the heightened anxieties. According to a recent poll conducted for the Washington-based journal International Economy, nearly 80 percent of Americans "worry" about the extent of foreign investment in the United States.1 Are their fears justified? Should foreign investment be restricted? Are restrictions compatible with an open-door foreign trade policy? The following research is intended to offer some answers to these questions, analyze foreign ownership as a national issue, discuss the extent offoreign penetration and its underlying causes, and place the benefits and costs of direct investment into proper perspective. Foreign ownership of national assets has always been a disquieting and divisive issue everywhere. The purchase of land, real property, and physical facilities by foreigners has been viewed historically with suspicion , distrust, and discomfort. People throughout the world seem to be 1. Warren Brooks, "The Americans Are Coming: Foreign Money Nonsense?," The Washington Times October 13, 1988. Jahangir Amuzegar is an international consultant and a former executive director of the International Monetary Fund. 101 102 SAIS REVIEW instinctively protective of what they consider to be their own—be it a small piece of personal property or a major item ofhistoric national value. Such concerns over foreign ownership may be rooted in the unpleasant memories of past territorial acquisitions, monopolistic concessions , or unfair bargains obtained by foreign colonial powers or their subjects . Yet while these events are now largely a matter of history and without corresponding relevance to the U.S. case, they seem to extend their legacies to contemporary transactions. For the most part, people often subconsciously regard foreign holdings as the economic equivalent of military invasion and foreign domination. They fear and resent losing control over their ways of doing things or giving up cherished symbols of their national identity. For most of this century, there has been a wave of nationalistic reactions against past excesses of colonialism and, by implication , massive foreign investments. Rational or not, the sense of unease brought about by foreign takeovers of local assets is real and important. It does influence and affect policy decisions in a pluralistic society. And as such, the perception of potential harm from foreign investments may be as significant as the actual threat. In the United States the current surge of anxiety over foreign ownership has intensified since 1987 with the publication of Martin and Susan Tolchin's Buying Into America: How Foreign Money is Changing the Face of Our Nation. The book warns against foreign control over vital sectors of the American economy and outsider's involvement in U.S. domestic politics; it deplores the threatening decline in the U.S. ability to determine its own fate and maintain its position as a supreme industrial power. As a result, the roster of "worried" Americans now includes some prominent political leaders, investment bankers, industrialists, corporate managers, and academic economists. In a 1988 survey by U.S. News and World Report, more than 72 percent of the people polled nationwide were found to favor laws limiting foreign investment in U.S. business and real estate. Nearly 90 percent wanted foreign investors to register their purchases. In the meantime, there have been bills before Congress to limit foreign holdings or make foreigners disclose the identity and size of their ownership. Some leading businessmen have proposed the creation of a presidential board to approve all foreign purchases of significance.2 2. Kirstin Downey, "Foreign Investment: A Divisive Issue in U.S.," The Washington Post, December 3, 1988; and SusanJ. Tolchin, "The Trouble With Foreign Investment," The Washington Post, July 2, 1988. FOREIGN DIRECT INVESTMENT 103 The intensity of public concern over foreign investment may suggest that, these days, something new or unprecedented is happening in America . Yet a cursory reading of U.S. history suffices to...