Regular readers know that I generally avoid wading into waters where political riptides dominate, and for that reason I have avoided commentary on the now defunct plan to allow interests from Dubai to take control of a (very) small number of US ports. But in today's Wall Street Journal (page A18 in the print edition), Larry Lindsey makes a pretty good case that the consequences go well beyond the political fallout:
...congressional attitudes on the ports raise questions about the sustainability of our global economic leadership. For over 50 years a bipartisan consensus has held that global free trade and the free movement of capital is in our interest. The U.S. was the world's driving force for globalization, whether the president was named Kennedy, Reagan, Clinton or Bush. That leadership has underpinned the greatest rise in living standards the world has seen, the emergence of a global middle class that now numbers well over a billion people, and America's triumph in the Cold War without ever firing a direct shot...
... America has not pushed globalization and the free movement of capital out of an altruistic concern for global development: These are causes from which America enjoys enormous benefits. This is particularly true today when the free movement of capital underpins so much of our macroeconomic stability. The U.S. is by far the largest investor in the rest of the world, with $10 trillion of assets overseas. We have pushed other countries to allow our companies to invest overseas because it was in our interest to do so. Our corporate boards did not authorize this scale of investment in order to lose money: Last year they made over $500 billion on these investments -- $1,600 for every person in the U.S. To insist on our ability to invest abroad but resist foreign investments here is untenable.
Even more important is that America is the recipient of a huge amount of foreign inward investment. Last year foreigners increased their investments here by $1.4 trillion. A good portion of this comes from the Middle East for the simple reason that their oil revenues have soared. Does Congress prefer that this money be invested elsewhere to create jobs overseas rather than here? Moreover, absent this capital inflow, interest rates would be far higher and equity prices far lower than what they currently are. If you hang out a "Not For Sale to Foreigners" sign, fewer bidders will mean lower prices.
Color me saddened, and distressed.