At the beginning of the week, Hotspur, in commentary, opined on the scrabbling in DC for protectionist legislation.
The government is the problem; nowhere in DC is the solution. Decibels of ululating amend not some very harsh facts. One may not eternally spend that which one does not have. Once more congress will violate that rule and hold a drowning economy’s head underwater. Shall we acquire the benefits of Carteresque economic policy once more?

When the Japanese acquired everything from Rockefeller Center to Movie studios, they over paid for businesses that they did not understand and for places that were mis en place. Today, the foreign buyers are procuring manufacturing, not moviemakers. While the physical plant may be immoveable, profits travel well. Globalization does quite well in textbooks; reality stains ones mellow like chaw drippings in a beard.

Overseas Investors Buy Aggressively in U.S.

Last May, a Saudi Arabian conglomerate bought a Massachusetts plastics maker. In November, a French company established a new factory in Adrian, Mich., adding 189 automotive jobs to an area accustomed to layoffs. In December, a British company bought a New Jersey maker of cough syrup.

For much of the world, the United States is now on sale at discount prices. With credit tight, unemployment growing and worries mounting about a potential recession, American business and government leaders are courting foreign money to keep the economy growing. Foreign investors are buying aggressively, taking advantage of American duress and a weak dollar to snap up what many see as bargains, while making inroads to the world’s largest market. [snip]

The surge of foreign money has injected fresh tension into a running debate about America’s place in the global economy. It has supplied state governors with a new development strategy — attracting foreign money. And it has reinvigorated sometimes jingoistic worries about foreigners securing control of America’s fortunes, a narrative last heard in the 1980s as Americans bought up Hondas and Rockefeller Center landed in Japanese hands.

With a growing share of investment coming from so-called sovereign wealth funds — vast pools of money controlled by governments from China to the Middle East — lawmakers and regulators are calling for greater scrutiny to ensure that foreign countries do not gain influence over the financial system or military-related technology. [snip]

Debate is swirling in Washington about the best way to stimulate a flagging economy. Despite divided opinion about the merits, foreign investment may be preventing deeper troubles by infusing hard-luck companies with cash and keeping some in business.

The most conspicuous beneficiaries are Wall Street banks like Merrill Lynch, Citigroup and Morgan Stanley, which have sold stakes to government-controlled funds in Asia and the Middle East to compensate for calamitous losses on mortgage markets. Beneath the headlines, a more profound shift is under way: Foreign entities last year captured stakes in American companies in businesses as diverse as real estate, steel-making, energy and baby food. [snip]

As the German company ThyssenKrupp Stainless broke ground in November on what is to be a $3.7 billion stainless steel plant in Calvert, Ala., its executives spoke effusively about the low cost of production in the United States and the chance to reach many millions of customers — particularly because of the North American Free Trade Agreement, which allows goods to flow into Mexico and Canada free of duty.

“The Nafta stainless steel market has great potential, and we’re committed to significantly expanding our business in this growth region,” said the company’s chairman, Jürgen H. Fechter, according to a statement.

Foreign giants like Toyota Motor and Sony have been sinking capital into American plants. Investment in the American subsidiaries of foreign companies grew to $43.3 billion last year from $39.2 billion the previous year, according to the research and consulting firm OCO Monitor.

“This is a vote of confidence in the American economy, the American marketplace and the American worker,” the deputy Treasury secretary, Robert M. Kimmitt, said. “These investments keep Americans employed and keep balance sheets strong.”

Five million Americans now work for foreign companies set up in the United States, Mr. Kimmitt said, and those jobs pay 30 percent more than similar work at domestic companies. Nearly a third of such jobs are in manufacturing, which explains why Rust Belt states have been wooing foreign investment. [snip]

“It’s the culmination of a series of fool’s errands,” said Leo W. Gerard, international president of the United Steelworkers. “We’ve hollowed out our industrial base and run up this massive trade deficit, and now the countries that have built the deficits are coming back to buy up our assets. It’s like spitting in your face.”

Other labor groups take a more pragmatic view.

“We need investment and we need to create good jobs,” said Thea Lee, policy director for the A.F.L.-C.I.O. in Washington. “We’re not in the position to be too choosy about where that investment comes from. But it does bring home the consequences of flawed trade policies over many, many years that we’re in this position of being dependent.” [snip]

Never mind that it is these very unions that put most manufacturing job overseas to start.

“This is a phenomenon that could be called the growth of state capitalism as opposed to market capitalism,” said Jeffrey E. Garten, a trade expert at the Yale School of Management. “The United States has not ever been on the receiving end of this before.” [snip]

If fear of foreign money now inspires Americans to erect new barriers, that would damage the economy, said Todd M. Malan, president of the Organization for International Investment, a Washington lobbying group financed by foreign companies.
[snip] (Emphasis mine)

No such outcry has greeted the purchase of stakes in major Wall Street banks by state investment funds in the United Arab Emirates, Kuwait, China, Singapore and South Korea. This is largely because the banks sold passive slices and ceded no formal control, which would have set off a federal review of the national security implications. But the silence also reflects the imperative that these enormous institutions swiftly secure cash.
[snip]

“They’re buying financial assets at well under book value,” said Gary C. Hufbauer, a trade expert at the Peterson Institute for International Economics.
[snip]

“The forces sucking in this capital are much bigger than the political forces,” said Mr. Garten, the Yale trade expert. “If there is a big controversy, it will be between Washington on the one hand and corporate America on the other. In that contest, the financiers and the businessmen are going to win, as they always do.”

Maybe the Donkephants should raise taxes to confiscatory levels, suck the economic marrow right out of US fiscal growth. That will solve the protectionist problem; the companies’ values drop to zero.

Archived in: China, Congress, Economy, Saudi Arabia, Taxation, Taxes, Unions