America In Hock: Why the Trade Deficits Mean Even More Americans Are Working for Bosses Based in Stuttgart, Zurich, and Tokyo
In recent years, conventional economic commentators have maintained that in a global economy trade deficits no longer matter. This is a highly mistaken view for several reasons. In particular it overlooks the fact that the United States has either to borrow abroad or sell assets to fund its trade position. In essence the United States is rapidly going into hock to its major economic competitors.
The most spectacular manifestation of this is the pattern for major American corporations to be taken over by foreign interests. In recent years, we have seen Amoco taken over by British Petroleum and Chrysler by Daimler-Benz. Much of American finance is already foreign-owned: First Boston, for instance, is owned by Credit Suisse, Republic Bank by HSBC Bank USA, Dillon Read by Union Bank of Switzerland, the Kemper Corporation by Zurich Insurance, and Bankers Trust by Deutsche Bank. More than half of the American book publishing industry is now German-owned. Even in the dot-com sector, foreign ownership has penetrated much further than almost anyone has noticed. Tokyo-based Softbank Corporation, for instance, has reputedly acquired stakes in more than 100 American cyberspace businesses of which Yahoo! and E*TRADE are only the most visible. Meanwhile, Paris-based LVMH is a major investor in the Datek online brokerage firm as well as in Cisco Systems and MP3.com.
Every day, it seems, brings news of another foreign takeover. In the last year alone, we have seen WPP Group of London bid for Young & Rubicam while Madrid-based Terra Networks has made an all-stock bid for the Lycos Internet portal. The Anglo-Dutch food company Unilever has bought Ben & Jerry's and agreed to purchase Bestfoods.
The cumulative effect of all this is not only a dramatic eclipse of American economic sovereignty as more and more Americans work for bosses based overseas but a dramatic diminution in America's economic standing on the world stage.
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