SPARTANBURG, S.C. — For the past five years, billions of dollars in foreign investment capital has poured into the United States, undergirding the longest peacetime economic expansion in American history. And almost since the influx began, economists have warned darkly that the situation spells inescapable trouble down the road.
If foreign investors pull back, as some feared they would after last month's stock market crash, then the U.S. economy will falter, the economists warn. Almost as bad, if foreigners continue to pour funds into U.S. securities, banks, real estate, factories and businesses, the United States will sink deeper into debtor-nation status and foreigners will drain off an ever-greater share of this country's wealth.
But there may be a third possibility. Here in South Carolina, experience suggests that foreign investors--lured by the world's best opportunities to make money--may not only continue to invest in the United States but also to reinvest their profits here instead of taking the money home with them.
For 20 years, ever since Hoechst AG of Frankfurt, West Germany, opened a factory for making the polyester fibers used by local plants in making cloth, an infusion of foreign capital--ardently wooed by local officials--has been a major force in revitalizing the region's decaying, textile-based industrial economy.
In the process, the rebirth of Spartanburg has provided one possible answer to a critical question for this country's economic future: To what extent has the tidal wave of foreign capital been used, as here, to finance productive investment for the future, and to what extent has it merely allowed Americans to sustain a coast-to-coast shopping binge?
If a substantial portion of the foreign capital has in fact been invested in ways that enhance U.S. productive capacity--as a considerable body of evidence nationwide suggests--then the long-term prognosis may be far brighter than the economists have suggested. The country could be laying the foundations for another historic surge of growth.
Indeed, if the immediate budget and trade deficit problems can be handled without triggering disaster, the massive in-flow of foreign capital may come to be seen as a kind of Marshall Plan in reverse.
The United States could emerge from the present period with much of its industrial might modernized and renewed--courtesy of the toiling workers of Japan and Western Europe, whose employers for so many years shipped their profits off to America instead of investing them at home.
Even under the best of circumstances, major obstacles--as well as serious belt-tightening and even difficult times--stand between this country and such a rosy dawn. But the experience here in Spartanburg does point toward a little-discussed possibility that the pessimists could be overstating their case.
Spartanburg's Interstate 85, the locus of most of the new foreign-financed manufacturing expansion here, is still known locally as "the Autobahn" in deference to German companies that led the influx. And Hoechst, which now employs 2,300 persons, was only the first of some 60 foreign-owned or foreign-affiliated companies from 10 countries, most of them Western European, that have invested more than $1 billion in the area.
The prosperity shows no signs of abating. Certainly Hoechst Celanese Corp., as Hoechst's wholly owned subsidiary here is now known, has no intention of cutting back. "Basically there is no change in our planning as a result of the recent activity on Wall Street," said Paul Foerster, Hoechst's German-born vice president for operations.
Hoechst does not even send its Spartanburg-generated profits to Frankfurt. Instead, it reinvests its profits right here. "That was how German industry was rebuilt after the war," Foerster said. "All profits were routinely plowed back into the business."
Even the Oct. 19 Wall Street debacle apparently did not drive foreign money out of the United States. Markets took the same beating overseas as they did in the United States, and the available evidence suggests that foreigners still recognize this as the one country in the world where the return on investment is greater, more stable and less taxed than anywhere else.
To be sure, almost all economists believe the United States cannot rely indefinitely on foreign capital to finance its own prosperity. Ultimately, it must increase its own rates of savings and investment--in part by reducing the enormous federal budget deficits that have been soaking up funds that would better have been used for more productive investments in the sorts of factories that dot the landscape in Spartanburg.
Filled the Void
But for now, and for at least a while longer, foreign money has nicely filled the void.