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Reason Foundation

Foreign Investment Creates Domestic Opportunity

Leonard Gilroy
October 18, 2009, 2:18pm

Protectionism is a personal pet peeve. I've written before about the folly of viewing direct foreign investment in America as a "them vs. us" issue, arguing instead that we should welcome international companies interested in creating job opportunities and investing billions of dollars in the United States. This is the reverse of outsourcing - it's "insourcing" - and it's good for the economy.

New York Times reporter Micheline Maynard has a new book coming out this week—The Selling of the American Economy: How Foreign Companies Are Remaking the American Dream—that examines foreign investment in the context of the American economy and politics, and the NYT ran an article today adapted from the book that's well worth a read:

Foreign companies may touch a nerve in American society and may still be an object of fear and distrust among many, who view foreign investment as a threat to the American worker and way of life. But foreign investment isn’t simply about helping workers earn a weekly paycheck. Foreign companies that invest in the United States are having a significant — and largely positive — impact on not only the lives of workers, but also the health of the American economy and society as a whole.

When foreign companies open a factory or buy a business in a region they also stimulate local commerce and create a demand for more homes, shops, schools and restaurants. They contribute money to schools, parks and towns, and lure consultants and technicians who then provide more jobs. This ripple effect explains why governors, mayors and economic development officials are so eager for foreign investors.

Without foreign investment, says Mitch Daniels, the Republican governor of Indiana, "we’d be a Dust Bowl."
Read the whole thing. One stat that popped out to me—which I haven't verified but which is noteworthy if accurate (and I have no reason to doubt it): Maynard writes that if these so-called "foreign" jobs did not exist, the unemployment rate would exceed 13 percent.

Leonard Gilroy is Director of Government Reform


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