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  Chapter Fourteen:

  Gross Domestic Product
  Business Cycles
  Business Revenues
  Trading Volume
  Dow Jones Average
  Crude Oil
  Energy Consumption
  Imports and Exports
  Foreign Investment



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Foreign Investment

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Toward the end of the century, U.S. ownership of foreign assets increased sharply, while foreign ownership of assets in the United States increased even more.
From colonial times until 1918, foreign, principally European, investments in the United States always exceeded American investments abroad. European capital helped to create the infrastructure of the new continent—canals and railroads, mines and mills. In World War I, European investments in the United States were consumed to pay for war materials, while new opportunities for American investors opened up abroad. The United States became a creditor nation and remained so for seventy-five years. 

At first, these international investments were relatively modest and their effects were barely visible. As late as 1970, foreigners owned very few American enterprises outright, and U.S. investment abroad consisted largely of the foreign branches of large corporations. 

This changed with the advent of globalization and the sharp increase in international transactions that occurred in the last two decades of the century. Between 1980 and 1999, the value of the foreign assets owned by Americans, corrected for inflation, increased sixfold. Ford and General Motors bought all or part of Isuzu, Mazda, Subaru, Jaguar, Saab, and Volvo. McDonald’s Corporation opened restaurants in 118 foreign countries. As the chart indicates, U.S. investment abroad, on a per capita basis, increased from $5,406 per American in 1980 to $26,286 per American in 1999. 

The value of the domestic assets owned by foreigners increased more than eightfold. On a per capita basis, foreign investment in the United States increased from $4,461 per American in 1980 to $31,688 per American in 1999. Foreign ownership and management of domestic enterprises—factories, farms, retail chains, commercial buildings, publishing companies, film studios—became commonplace. By 1999, foreign investments in this country exceeded U.S. investments abroad by more than a trillion dollars. Much of this increase was the result of the huge rise in U.S. stock prices, which raised the value of foreign investments here. 

In The Illustrated Guide to the American Economy, Herbert Stein and Murray Foss pointed out that the consequences of the nation’s international investment position are less serious than might be supposed, because the total wealth of Americans continued to increase, greatly exceeding American liabilities to the rest of the world.

Chapter 14 chart 11

Source Notes
Source Abbreviations

HS series U 26 and U 33; SA 1987, table 1389; SA 1993, table 1331; and SA 1999, table 1310. For the consequences of the increased value of foreign investment, see Herbert Stein and Murray Foss, The Illustrated Guide to the American Economy, 3d ed. (Washington, D.C.: AEI Press, 1999), pages 268–269.


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