CONSISTENTLY for 35 years, from the end of World War II onward, the American economy pumped a flow of equity capital out to the rest of the world. It was money representing not only investment but ownership of factories, mines and oil wells. Sometimes foreign countries were uneasy about it, for it meant American control of those assets. But it also meant a flow of technology that increased productivity and raised standards of living. Last year that outward movement of American investment suddenly reversed itself. For the first time in a generation, Americans brought home more investment capital than they sent abroad.
The reason for it is probably the strain on the parent corporations in this country, as the recession goes on. But foreign investors' reaction to similar strains was precisely the opposite. Instead of bringing their American investments home, they have sharply increased the amounts of money that they are sending here. The scale of foreign investments in this country began to rise rapidly in the late 1970s. But last year's total was more than twice as large as any previous year's.
It's a reminder to Americans that, however gloomy they might consider the outlook here, the United States remains the world's idea of a safe haven. Perhaps you wondered whether this unprecedented tide of foreign investment here is all oil money coming from the Middle East. No. Some, but not much, foreign oil money goes into business investments here. The huge flow last year came in significant part from France, where a Socialist goverment was elected. It came from Britain, Holland and Germany. It came from Canada, where business distrust of the Trudeau government was deepening. For the first time, there was substantial investment here from Japan.
These surges last year violated conventional theory, since the high exchange rate of the dolllar made it expensive for foreigners to move their money in. It seems that they were willing to pay a stiff premium for security.
Perhaps the 1981 pattern will persist; perhaps it won't. But the amounts of money are large enough to influence the way the international economy works, and this abrupt break in a long-established trend is an authentic reflection of states of mind around the world. Financial statistics are the most sincere kind of public opinion poll. They suggest that, among people who have or manage capital, the epidemic of pessimism is far more severe in the other industrial countries than here.