For Sale: America

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In the view of Hawaii Governor John Waihee, "It's not the origin of an investment dollar that makes it good or bad, but how it is invested." Takeovers that encourage U.S. competitiveness and efficiency and refurbish aging plants and equipment, in other words, are usually good, whoever spends the money. Likewise, the money that foreign companies invest in America is usually more important than the ultimate destination of any future profits. "To a worker in Chicago, does it make any difference whether the dividends go to New York or Tokyo? No," says Economist Edward Bernstein, a guest scholar at the Brookings Institution.

Economic experts in other countries, notably Canada and Britain, wryly point out that they have faced similar and even proportionately larger tides of foreign investment without losing control of their national destiny. Says Economist Alan Rugman of the C.D. Howe Institute, a leading Canadian think tank: "We in Canada have much more foreign ownership than the U.S. will ever have, and we're one of the wealthiest countries in the world as a result." Even so, Canada has suffered through prolonged bouts of unhappiness concerning foreign influence within its $379.3 billion economy and has occasionally lashed back at foreign investors, at substantial cost.

Amid the growing U.S. hubbub about acquisitive foreigners, a fact worth remembering is the importance of America's own trillion-dollar foreign holdings abroad. Any crimping of foreign investment in the U.S. would invite similar measures against American investors elsewhere -- the equivalent, that is, of trade protectionism. Ironically enough, overseas worries about rising American protectionism toward imports is a prime reason for many foreign manufacturers' desire to buy physically into the U.S. market.

The U.S. economy has long based its prosperity in large part on the free flow of capital across international borders. In the mid-19th century, European investments helped finance the building of America's railroads, essential for opening up the West. Later, Europeans put their money into American ranching, farming and mining. After the turn of the century, foreigners helped buttress one of the most powerful companies of the era, U.S. Steel, by buying up fully 25% of its equity.

The current crush of foreign buyers offers more opportunities than threats -- and, in any event, the $4.5 trillion U.S. economy's best insulation against invasion remains its sheer size. Says Theodore Moran, a professor of international business diplomacy at Georgetown University: "We are not going to have our economy taken over by foreigners unless it continues to decline for 50 or 60 years." That holds true even though a couple of Asian shoppers, South Korea and Taiwan, have barely begun to make strides in the U.S. buyout market. Yet as foreigners continue to rush in, new American properties are constantly being built to balance the outside purchases. In real estate alone, the U.S. annually constructs some $30 billion worth of shopping malls, $10 billion worth of factories and $6 billion worth of hotels.