The Politics of Private Foreign Investment
Article Summary and Author Biography
The unique role of the United States in the world economy arises not from the fact that it is by far the largest trading nation but from the importance of the Government's payments abroad and the magnitude of U.S. private foreign investment. In 1966, the Government provided $4.6 billion in economic aid and foreign credits, and military expenditures abroad were $3.6 billion (apart from military aid), while the outflow of private capital was close to $4 billion. It is clear enough that the international transactions of the U.S. Government are essentially of a political character, although they have important economic effects on this country and the rest of the world. What is not so clear is that there are political aspects to our private foreign investment-not because it is motivated by foreign policy considerations, but because foreign countries are concerned about its impact on their economic and foreign policies. This is inevitable, given the magnitude of these investments and their role in the economies of the countries in which they are made.
The unique role of the United States in the world economy arises not from the fact that it is by far the largest trading nation but from the importance of the Government's payments abroad and the magnitude of U.S. private foreign investment. In 1966, the Government provided $4.6 billion in economic aid and foreign credits, and military expenditures abroad were $3.6 billion (apart from military aid), while the outflow of private capital was close to $4 billion. It is clear enough that the international transactions of the U.S. Government are essentially of a political character, although they have important economic effects on this country and the rest of the world. What is not so clear is that there are political aspects to our private foreign investment-not because it is motivated by foreign policy considerations, but because foreign countries are concerned about its impact on their economic and foreign policies. This is inevitable, given the magnitude of these investments and their role in the economies of the countries in which they are made.
The private foreign investments of the United States now have a book value of over $86 billion. Last year they yielded a net income of about $7.0 billion of which about $5.6 billion was remitted to the United States and about $1.4 billion was retained by the foreign subsidiaries as undistributed profits. In addition, over $1 billion was remitted in fees and royalties. The true market value of U.S. private foreign investments, as indicated by a conservative capitalization of the income, must be well in excess of $100 billion. (See Table I, next page.)
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