Encima Global president David Malpass says that, for the first time in decades, America is losing growth capital instead of attracting it.
“That may be the single most important explanation for persistently high unemployment and stagnant wages,” Malpass, in conjunction with senior economics editor Stephen Moore, writes in The Wall Street Journal.
"This is a recent and dramatic reversal of fortune.”
Huge net inflows of productive capital into the U.S. in the 1980s and 1990s helped finance the 25-year boom in jobs and broad-based prosperity from 1982-2007, Malpass says.
Over that period, foreigners invested just over $6 trillion more in the United States (in total capital) than Americans invested abroad, according to the Bureau of Economic Analysis, with most of it going into businesses.
“It is true that foreign direct investment rose to $236 billion in 2010 from $159 billion in 2009. But that was still well below the $310 billion invested in 2008,” Malpass notes.
Moreover, during a recent speech on the state on foreign investment in the United States, President Barack Obama neglected to disclose that in the first quarter of 2011 foreign investment fell by 51 percent from the first quarter of last year, according to data released last month from the federal Bureau of Economic Analysis.
“Foreigners of late have not found the U.S. to be a receptive, high-return home for investment,” says Malpass.
Economist Niall Ferguson says one way to attract more foreign investment is to put some U.S. assets up for sale.
“The U.S. needs to do exactly what it would if it were a severely indebted company: sell off assets to balance its books,” Ferguson writes in Newsweek.
“Why is selling assets to Asians worse than paying them an annual rent called interest on the national debt?"
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