Buying us Out
America for Sale.
by Kenneth C. Crowe.
Anchor Books. 297 pp. $5.95.
Financial Invasion of the U.S.A.: A Threat to American Society?
by Earl H. Fry.
McGraw-Hill. 202 pp. $8.95.
Since 1947, ever increasing amounts of foreign money have been seeking an investment haven in American stocks, real estate, and bonds. Stated in numerical terms, the fact may seem uninteresting, and certainly not a cause for alarm. What major concern could there be over Germany’s ownership of $39 billion of U.S. Treasury bills, or Japan’s $24 billion interest in U.S. government certificates?
The scene becomes more dramatic, however, as American corporate institutions attract large sums of foreign capital and in some instances actually become foreign companies doing business in America under old, familiar names. At the present time, a German company controls A & P. The Banque Arabe et Internationale d’lnvestissement has bought heavily into the Reynolds brokerage house. The Marine Midland Bank is controlled by Hong Kong interests. Familiar American institutions are no longer American: Keebler cookies, Stouffer frozen foods, Good Humor, Nestle’s, Baskin-Robbins, Alka Seltzer, Gimbel’s, Saks Fifth Avenue, and half of the choice land in Mark Twain’s Mississippi Delta.
Kenneth Crowe, in America For Sale, is alarmed by what he considers a menacing trend toward foreign domination of America’s big industries. And since big business is very near—or at—the center of American political power, Crowe senses a potential danger to our ability to control our own centers of domestic influence. Earl Fry, in Financial Invasion of the U.S.A., takes a more optimistic stance, although he too observes that the government “certainly needs to develop better methods to monitor OPEC and other overseas investment activity in the United States.” Despite their different perspectives, both authors agree that we will have to confront the implications of substantial foreign investment before the present decade runs its course.
Consider the extent of foreign economic involvement in America: between 1974 and 1976, the number of bank branches of foreign firms more than doubled. Whereas, in 1972, foreigners controlled banking assets totaling $26.8 billion, at the present time that figure has ballooned to $140 billion. A case could be made that under these circumstances certain issues of foreign policy (economic boycotts, for example) may come to be determined by the referents of faceless digits on a computer printout at Citibank.
Forbes magazine reports that the combined sales of the 100 largest companies representing foreign investors in the U.S. amount to $113 billion. This is a staggering 40-percent growth in just seventeen months. The U.S. Department of Commerce, utilizing an arcane and understated method to determine “the value of foreign parent [companies’] direct claim on the assets of their U.S. affiliates”—that is, total control—estimates the extent of such control in 1974 at $26.5 billion; it had been only $3 billion twenty years earlier.
During that same period—and up to today—the individual American investor has been a net liquidator of common stocks while foreigners have been net purchasers. One does not have to be paranoid to perceive the potential danger of a Raytheon or Boeing falling under foreign control, with the delivery of, say, American missiles becoming the responsibility of a less than friendly country. (The attempt by First Arabian Corporation to acquire a 41-percent interest in Lockheed is a concrete example of such a discomfiting possibility.)
The surge of foreign investing does not seem to scare Earl Fry. He is not agitated over the fact that the world’s third largest bank, the Deutsche Bank of Germany, recently purchased 80 percent of Pennzoil Place in Houston for $93 million and then resold it to the German public for $5,000 a share. He deems virtually harmless the German involvement in the Playboy casino complex in Atlantic City. By citing isolated instances, Fry is able to avoid the implications of financial involvement by hostile or potentially hostile forces.
Kenneth Crowe, by contrast, states that “to view foreign investment in the U.S. in the context of simple investment and return on stocks, bonds, and properties is naive. The dramatic growth of Arab wealth has been translated into a concurrent growth in Arab eco-power and Arab influence in the U.S.” If he is right, the fact that the oil-exporting countries will be faced with a surplus of $120 billion in 1980 alone bodes ill for our ability to control our own destiny, for the great part of that tidy sum will surely find its way to our shores.
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Should we blame this loss of sovereignty on a conspiracy of aliens? Hardly. Some of the most influential names in American politics have had an active hand in building foreign influence in key American industries. When Harry Anderson, chairman of Merrill Lynch Pierce Fenner and Smith, visited Abu Dhabi, his guide was not the Secretary of State of the United Arab Emirates, or the Prime Minister of Abu Dhabi, but William P. Rogers, Secretary of State under Nixon and Attorney General under President Eisenhower. (Rogers’s name is the one that pops up most often in Crowe’s book.) Other statesmen giving counsel to Arabs in their quest for economic power have been John Connally, whose law firm represents First Arabian Corporation in the U.S.; William Fulbright, of the influential Senate Foreign Relations Committee and critic of our Middle East policy; Spiro Agnew; and Clark Clifford, occasional legal representative of Algeria and of Saudi Arabia’s Adnan Khashoggi. (Then there is of course Billy Carter and Libya.)
At times, the American power structure supporting the foreign effort cuts across international boundaries and involves more than one domestic ally; Prince Mohamed of Saudi Arabia went into a 50-50 deal with Brown Brothers Harriman Ripley, the Wall Street bankers, to form a new consulting firm based in Munich and run by John J. McCloy II, son of the former U.S. High Commissioner in Germany and attorney to major multinational oil companies in their dealings with Washington.
How have such influential and famous Americans carried on these privately lucrative activities without risking public opprobrium? For one thing, they are contemptuous of the ability of the American people to find anything out.
For another, they are not above using rhetorical blackmail in the face of demands to publicize foreign, especially Arab, involvement. Thus Senator Charles Percy rationalizes secrecy concerning the extent of Kuwait’s influence in our banking system. From America For Sale:
Percy in his advocacy of bank secrecy put an interesting twist on his arguments to other Senators. He told them that Kuwait’s Finance Minister, Abdul Rahman Salim al-Atiqi, had warned him that Kuwait would withdraw its money from the U.S. banks if details of those deposits were revealed. Percy said: “One of the great ironies that we have is that the city of New York is on the precipice of bankruptcy which to a degree is dependent upon the Arab countries keeping their money in the New York banks. If Saudi Arabia and Kuwait withdrew their bank deposits, the biggest single loser would be the city of New York, and I would say the American Jewish community, centered in New York, would be the larger loser of that.”
Certain politicians’ secure conviction that the American people will never understand the significance of the quiet invasion of capital may be justified by recent history. Our response to and even our acknowledgment of genuinely cataclysmic events leave something to be desired. When the OPEC nations violated the Teheran Agreement and the Tripoli Agreement of 1971 (which was supposed to fix the price of oil until January 1, 1976) by unilaterally raising the price on October 17, 1973, the New York Times buried the story on page 16. Every major economic story since then is in some way related to that move by OPEC, yet it was only in retrospect that its importance was recognized by our most sophisticated newspaper.
Even someone as knowledgeable as Earl Fry, for all his understanding of the statistical data, fails to grasp the point. He makes much of the fact that America’s investment abroad is four times as great as foreign investment here, thus minimizing the importance of the latter and ignoring the necessary distinction between investment and potential blackmail. “Overblown rhetoric” is what Fry calls Congressman Harkin’s statement that the oil-producing nations “could buy the whole state of Iowa . . . with just 394 days of oil production”; there has been no foreign interest at all in Iowa’s farmland, he points out. Yet the fear of potential power wielded by a hostile force is real, rhetoric notwithstanding: in an eighteen-month period (1977-78), aliens bought enough land to fill the state of Rhode Island, and Fry himself reports that “Europeans spent $800 million for U.S. farmland in 1977 alone.”
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There is no sign of any lessening in the foreign appetite for our farmland, our stocks, our buildings, and our companies. Since it is an accepted tenet that every nation has a right to control its own destiny, it is imperative that we begin to regulate the extent of foreign involvement here. Not surprisingly (since so many of our leading politicians are happy to cater to foreign appetites), there is as yet no watchdog committee or overseer to monitor the extent of foreign involvement in key areas. Yet there is ample precedent for regulation, and even restrictions of such activity. Non-resident aliens are currently excluded from engaging in coastal or inland water shipping activities, and the Merchant Marine Act of 1920 implicitly recognizes that in matters of civil defense, we have the right to be restrictive. Such behavior need not be equated with restrictive tariffs or other isolationist acts. Domestic control of domestic resources is a legitimate principle, as the Third World has so ably demonstrated.
