Time for America to grow up about the global connectivity of foreign direct investment:
ARTICLE: “U.S. Lawmakers Receive Global Criticism for Objections to Ports Deal,” by Aaron O. Patrick, Wall Street Journal, 25-26 February 2006, p. A4.
ARTICLE: “A Ship Already Sailed: America Ceded Its Seaport Terminals to Foreigners Years Ago,” by Simon Romero and Heather Timmons, New York Times, 24 February 2006, p. C1.
OP-ED: “Ports in a Storm: Do we believe in free trade, or don’t we?” by Zachary Karabell, Wall Street Journal, 23 February 2006, p. A16.
EDITORIAL: “Ports of Gall: The new protectionists use national security as their cover,” Wall Street Journal, 25-26 February 2006, p. A10.
ARTICLE: “Thwarted Attack At Saudi Facility Stirs Energy Fears: Officials Worry Terrorists Are Targeting Oil System; Crude Futures Jump 4%,” by Bhushan Bahree and Chip Cummins, Wall Street Journal, 25-26 February 2006, p. A1.
ARTICLE: “In Ports Furor, a Clash Over Dubai: Debate Exposes Conflicts Between Security Needs And Foreign Investment; PetroChina Hangs On in Sudan,” by Bernard Wysocki Jr. and Michael M. Phillips, Wall Street Journal, 23 February 2006, p. A1.
ARTICLE: “How Foreign Banks Scaled the Chinese Wall: Titans Acquire Minority Stakes With Little Control of Their Own; Will the Strategy Prove Wise?” by Kate Linebaugh, Wall Street Journal, 23 February 2006, p. C1.
ARTICLE: “Intel to Build Vietnam Chip Plant, Raising Nation’s High-Tech Profile,” by James Hookway and Nguyen Pram Muoi, Wall Street Journal, 24 February 2006, p. A4.
ARTICLE: “U.S. Funds Take On Global Flavor: Foreign Companies’ Equities Increasingly Populate Portfolios As Returns Pick Up Overseas,” by Tom Lauricella, Wall Street Journal, 24 February 2006, p. C1.
America has been the single biggest kingpin in outward-bound foreign direct investment since the Second World War, meaning our cumulative total of investment in other countries is bigger than anybody else on the planet. Sure, when you bundle up Europe’s numbers, they are huge (2X ours), but that’s including all the intra-European investment, which is like counting Florida investing in Michigan. Strip away all the self investment, and America is more than equal to Europe’s overseas investment total.
Have we benefited from all that overseas investing? Sure. We’re sought out cheaper resources and labor over the decades, pushing American firms to become ever more efficient and to move up the production value chain to new heights of technology and productivity. Have such investments forced our economy and society to leave behind industries that once defined our labor pool? Sure, but that’s progress, unless you think it’s better defined by every child performing the same job as their parents once did, and their parents once did, and their parents once did, and so on.
All that investment has built up this magnificent global economy, which is bigger now than it has ever been, and features less violence and danger than it has ever had to withstand before. That’s right. You go back in history and you will find an ever increasing percentage of humanity either actively involved in or preparing for mass violence. Today, that percentage is lower than it has ever been, because the numbers and cumulative size of conflicts around the world are lower than they’ve ever been.
The spread of the global economy is responsible for that, and our immense role in exporting investments around this world has been preeminent in creating that future worth living.
And yet we are so fearful of the mutually-assured dependence we’ve created with all this investment, especially when it comes back at us in the form of other countries investing in the U.S., something that’s been a hallmark of our development for decades and decades stretching back to our infancy. I know, I know, America was a perfect democracy from the start and we built this entire economy on our own, with no help from anybody except the immigrants who showed up. This is the American mythos, and we love it. But the truth is we've had huge inflows of foreign direct investment throughout our history (Number 1? The Dutch.), as lotsa foreigners “exploited our cheap labor” and our natural resources. And we benefited hugely from this.
Truth be told: no country develops without access to foreign money in this global economy. So FDI must flow. In reality, it’s the Dune-like “spice” that drives our global economy—more than oil does.
So we are rightly criticized as hypocrites when our lawmakers object to the UAE ports deal. Not just because it’s anti-trade, but because it flies in the face of current reality: the countries that run the world’s ports, including ours, are those that most heavily depend on trade (Hong Kong, Dubai, Singapore, Denmark, China, Germany, Taiwan and that city-state called Seattle). Seafaring centers rule that trade (can I get a “duh”!).
This is our game, the one we created after WW II to keep great power peace, and it’s worked like a dream. Now, great powers and wannabe regional ones all play by our rules. So when one of them does unto us what we’ve been doing unto them for decades, it’s pretty strange for us to cry foul, and even worse to cry national security.
Did DP World have an advantage in bidding for the British company that currently runs a number of our ports? Sure. And we should we wary of letting states-masquerading-as-companies pretend they are playing on a level field? All things being equal? Yes. But all things are rarely equal. And if we’re seeing connectivity result that otherwise would not be there, then I say we choose investment over fear. Do I want Dubai to become a Hong Kong/Singapore of the Middle East? Sure. Because I want the Middle East to connect up to the world. In fact, that’s the whole purpose behind our Big Bang strategy of toppling Saddam: connecting the Middle East up to the global economy faster than the jihadists can disconnect it.
The Al Qaedaists of the Middle East know damn well what they’re doing: they want to sabotage the regions’ economies, disconnecting them from the world, and reap the whirlwind of social distress. Thus we should expect more attacks on port and energy facilities like the one that targeted the Abqaiq facility recently.
I know that some op-ed strategists want to play that game as well, arguing we should cut the global economy off from the Middle East by denying ourselves its oil as quickly as possible, but I argue for just the opposite approach. I want shared economic and strategic interests, not some rapid-fire economic divorce.
That’s the essential nature of the military-market nexus that we ourselves have forged in this era of globalization. I know we are called a debtor nation, but in reality we are a security exporter, one that overspends our public funds in order to pay for the world’s security, which only our power-projecting military is capable of providing. For that service, the world pays us by buying our debt. But that process can only go so far, as we’ve seen with Japan years ago and China today. After a while, our trade partners can accumulate only so much of our money in reserves. When saturation is reached (beyond the fear of currency speculation), then these countries naturally want to diversify their holdings; they want to own us as much as we own them.
This is natural and good and a furthering of the mutually-assured dependence that defines the Functioning Core of globalization. In fact, to move from the Non-Integrating Gap to the Core, such interdependency must be an avowed goal of the migrating nation (in this case, Dubai). We either welcome that mutual dependence or we renounce the very system of growing global peace that we engineered.
We are too far down this road to change course. Invest in a “U.S.” mutual fund today and you’ll find that much of its money sits abroad, seeking greater opportunity--as it should. Some can call such activity akin to being "economic traitors," a charge so foolishly wrongheaded as to deserve complete condemnation. Instead, such investments do more to secure our national security than all the efforts of our defense establishment.
And yet it is so sad to see American leaders, right at the moment of our emerging historical triumph, becoming so amazingly full of self-doubt and fear. What do we need to continue to succeed in the world we’ve created? A highly educated and ambitious labor pool of entrepreneurs. How hard is that to achieve? You tell me.
Other countries are responding to this challenge of Friedman’s “Flat World,” and they’re doing so with less fear. China lets our banks buy into their banks. Vietnam lets Intel come in and build a big chip factory that, a few years back, would have gone to China. Everyone is striving mightily to move up the production chain and all America does is fret over industries we’ve let go abroad instead of focusing on what we really need to do next: invent the next wave of industries that will define our future.
But I am being too harsh here: those industries are appearing across the dial in America. We just need to revamp a lifelong educational system to make American labor confident enough that we can collectively migrate our skills and labor to what comes next, instead of vainly trying to hold onto what came before.
Yes, yes, easier said than done. But what do these “far-sighted” protectionists offer us instead? Look closely, because upon further examination it comes off as a sort of economic back-to-the-future escapism that comes uncomfortably close to Osama’s arguments for civilizational apartheid: “Don’t deal with this challenging future; instead retreat into a more homogenous imaginary past.”
We need confidence now more than ever because we are closer—now more than ever--to the global future we’ve been crafting for decades and decades. I feel a huge debt to the Greatest Generation, one that requires I keep pushing the pile throughout my career. I have never felt more connected to both past and future as I do today, and it fills me with a sense of great optimism.
But optimism requires confidence. You have to see the world you’ve created. You need to feel a pride of ownership and a sense of parental satisfaction.
And at some time you have to let go of your fears. You have to accept countries for what they’re becoming, not what they’ve been. You need to seize the opportunities to turn enemies into partners and partners into close friends.
We are at that moment in history.
We need that confidence and that optimism that’s defined America’s past and will shape this world’s future even more.
We all live in a world of our making. Some deride that self-awareness as naïve or delusional.
I call it real power and tell all the fear-mongers to f--k off.