‘If summer were spring and the other way round,
Then all the world would be upside down.”
In 1781, the above ditty, “The World Turned Upside Down,” was reputedly played as the defeated British troops marched out of Yorktown after being beaten by the Americans. A ragtag army had defeated the most powerful country in the world.
Some 225 years later, foreign corporations and sovereign wealth funds — funds owned by a foreign country that can purchase stocks, property or bonds of other nations — are taking over the American ownership of U.S. corporations and real estate.
In our new globalized world, buyers of America represent all races, creeds and colors.
The latest blow to our image of economic supremacy is the fate of the “King of Beers.” I am referring to the fact that InBev, a Belgian brewer, initiated a bid worth $46 billion for Anheuser-Busch, which the maker of Budweiser has since turned down. The truth is, foreign ownership of America is ubiquitous:
* CEMEX, a Mexico-based company, is the largest cement and ready-mix company in the United States.
* Sony Corp., through its acquisition of Columbia Pictures’ library, now owns the classic Jimmy Stewart movie “Mr. Smith Goes to Washington.”
* Bridgestone Corp., a Japanese company, acquired Firestone Tire and Rubber Co.
In addition, some of our important infrastructure is now foreign owned:
* The French transnational Suez and German conglomerate RWE own three of the largest water companies that provide operations and maintenance services to publicly owned water and wastewater systems in the United States
* United Kingdom company National Grid supplies electrical power to much of our Northeast.
* The Chicago Skyway and Indiana Toll Road have long-term leases with Australian-owned Macquarie Infrastructure Group and Spanish-owned Cintra.
Former Secretary of Commerce Peter Peterson highlighted the implications of a continued large trade and budget deficits by the United States with this analogy.
Peterson said the difference between being a creditor and a debtor is as significant as the difference between being a plantation owner and a sharecropper.
Sovereign wealth funds are already large — worth $1.5 trillion to $2.5 trillion, as estimated by the U.S. Treasury Department. Morgan Stanley predicts that by 2015, sovereign wealth funds could be managing $12 trillion.
Clearly, these funds will finance more takeovers of American assets.
Most of the assets generated by foreign companies and sovereign wealth funds derive from oil exports or the accumulation of massive trade surpluses. Unfortunately, many of the regimes that bankroll sovereign-wealth funds are often authoritarian and sometimes downright dangerous.
Eighteenth-century essayist Samuel Johnson famously called patriotism “the last refuge of a scoundrel.”
In the present context, many of the self-styled “American” patriots are indeed scoundrels, cynically garnering political support by an appeal to a foolish nativism rather than admitting the economic reality that a byproduct of being the world’s largest debtor is foreign ownership.
On the other hand, concerned Americans have a right to ask, what if hostile governments take a stake in a strategically important company or what if it starts playing politics with its cash?
Sovereign funds in recent months have taken meaningful equity positions in Morgan Stanley, Merrill Lynch and Citicorp. They provided billions of dollars to these beleaguered institutions that faced an imminent credit crisis from a combination of over-leveraged balance sheets, illiquid assets and dependence upon tenuous credit from overnight borrowing.
An Indian expatriate, now living in London, controls U.S. Steel. Finmeccanica, which is one-third owned by the Italian government, is in advanced talks to purchase New Jersey defense company DRS Technologies, which builds everything from aircraft and missiles to underwater defense systems and air-traffic control networks.
In a nutshell, the larger the U.S. deficit, the less leverage the United States can deploy to stop unwanted takeovers.
Since the United States is borrowing $2 billion daily to finance its current deficits, we must recognize our weakened negotiating position to prevent takeovers of strategic companies. I can visualize the U.S. Chamber of Commerce setting up welcome mats from Beijing to Tokyo to Singapore. The sequel to “Mr. Smith Goes to Washington” might be “Tom Cruise Goes to Beijing.”
Originally published in the Sarasota Herald-Tribune
