Tuesday, January 24, 2006
Years ago I read a very insightful book entitled, "Bound to Lead: The Changing Nature of American Power" by Joseph S. Nye, Jr, published in 1990. One excerpt on the dustjacket stated -- "In 1989, polls showed that half the American public believed the nation to be in decline, and that more than half saw the economic threat from our allies in Europe and Japan as more serious than the military threat from Gorbachev's Soviet Union." It is 17 years since this polling data was cited and instead of Japan (economic corpse) striking fear in Americans' hearts it is the rise of China that concerns us since "outsourcing" and "cheap textiles from China" dominate our news media.
My working theory from the 80's and 90's is that "Japan Inc." scared the hell out of Americans because they simply don't look like us (remember WW II racism -- the US government interned Japanese-Americans in prison camps but not German-Americans due to national security concerns) but today's source of the "Yellow Peril" (http://www.nationalist.org/docs/cartoons/2001/yellow.html) is now China. In Mr. Nye's book he highlighted the statistic that the foreign country that owned the largest amount of assets (circa 1990) in the USA was in fact the United Kingdom NOT Japan as I always hear people respond when I pose the question to them when they express concern about China taking over the world.
Today's report from UNCTAD provides a great overview of "foreign direct investment" (FDI) trends in the world providing a great benchmark regarding investors' confidence in national economies:
UNCTAD: U.K. Tops World in Foreign Direct Investment London -- According to a new report by the United Nations Conference on Trade and Development (UNCTAD), the U.K. received more than Â£124 billion in foreign direct investment (FDI) in 2005, a remarkable 182% year-on-year increase and the largest total ever recorded by a European country. In fact, the U.K. attracted more FDI last year than any other country in the world.
The U.S., which came in second place on UNCTAD's ranking, attracted less than half the U.K. total with Â£56 billion. China came in third place, attracting about Â£34 billion. UNCTAD said FDI in the 10 new EU member states increased by 36% to more than Â£21 billion. http://www.unctad.org/Templates/StartPage.asp?intItemID=2068
What really caught my attention when I saw these rankings is that the number one ranked country, United Kingdom, was the "birthplace of the Industrial Revolution" so clearly it has not lost its attractiveness as an investment choice due to emerging markets such as China nor has the USA since it is the second ranked country although I have to speculate that opposition to the war in Iraq affected some investment decisions given the management role many governments play in businesses around the world directly or indirectly.
Let me encourage you to think like an investor and a consumer versus thinking like a tribalist which historically has driven nations to war with each other. To lighten the mood a bit let me share the lyrics of "Turning Japanese" - http://www.lyricsxp.com/lyrics/t/turning_japanese_the_vapors.html performed by The Vapors. Nothing is better than some 80's music to cheer you up :)
Peace through trade,