Advertisement

The price of fear

Share

DOES THE OUTSIDE WORLD present more of an opportunity or a threat? In many nations, the answer to that question is unchanging over time. But throughout our history, Americans have oscillated between both answers. And lately, fear seems to be making a comeback.

The recent hysteria in Washington and across the nation over the possibility that a Dubai-based company might assume management of several U.S. port facilities is a distressing indicator of how far the pendulum has swung toward paranoia. Narrow-minded protectionism and xenophobia are on the rise, running the risk of derailing the U.S. economy and further alienating the rest of the world.

Because the U.S. economy is by far the world’s largest, and its market by far the most open, Americans benefit more from globalization than citizens of any other nation. The American economy remains in good shape, despite our profligate ways, in part because foreigners continue to invest in this country. Although anti-American sentiment is on the upswing in some parts of the world, most major developing countries continue to emulate American economic thinking while actively engaging us.

Advertisement

All of which makes it self-defeating for the U.S. to be flirting with defiant disengagement. On issues ranging from immigration to trade policy, Washington -- particularly Congress -- wants to play the role of victim rather than global leader. Talk of slapping large tariffs on Chinese imports because of overwrought concerns about trade deficits is but one example of how lawmakers seem eager to do their best to slow the robust U.S. economy.

Much like the successful opposition to the Chinese acquisition of Unocal Corp. last year, the recent port saga (which is more about politics than security) could unleash a broader assault on American receptivity to foreign investment. The U.S. retains antiquated, nonsensical limits on foreign ownership in several sectors of the economy, notably broadcasting and aviation. In today’s political environment, it seems likely that Congress will extend such restrictions to other sectors.

It is appropriate for a federal interagency committee to review a variety of mergers involving foreign interests on security grounds. But proposals to give Congress a role in the process are an invitation for political mischief and economic backsliding. Rising American protectionism will only encourage protectionists overseas, at the expense of American companies and export-related jobs here. And if the United States rolls up the welcome mat to foreign investment, the results could be catastrophic, especially if foreign investors and central banks react by dumping American securities and Treasury notes.

Fear should not drive the nation’s economic policy. Because in economics, fear -- even when it is irrational -- can prove self-fulfilling.

Advertisement