In what was called a “scripted conversation” with Boeing’s CEO James McNerney, Jr., President Obama reprised his Malaise Moment of a few weeks ago, and said, “We’ve been a little bit lazy, I think, over the last couple of decades,” which resulted in the 2009 dropoff in Foreign Direct Investment in the United States.
I have to admit that my first reaction was that I was too busy to be bothered with replying. But, as the saying goes, sharks gotta swim and bats gotta fly.
Taken at face value, I don’t have any idea what the hell he was talking about. Worse, I don’t think he does, either. Certainly even a cursory examination of the facts would reinforce the conclusion that Obama’s grasp of recent economic history isn’t any better than his grasp of mid-century diplomatic history.
Below is a quarterly graph of foreign direct investment in the United States, starting in 1980. The series starts in 1960, but it roughly zero from then until 1980, owing to the fact that the US, generating the lion’s share of the world’s wealth, was relying on exports more than FDI for growth:
You can see a couple of patterns here. First, FDI accelerates through the business cycle, as expected. As the economy picks up steam, it generates interest abroad and confidence in investors looking for growth. Second, over the last “couple of decades,” FDI has grown through each business cycle, if you discount the dot-com bubble evident in the very late 90s. Third, when the US economy goes into recession, foreigners stop investing here, until they see some evidence of a bounce-back. All of these patterns clearly apply to the most recent recession, and the current economy.
Of course, we all knew this was bunk, anyway. National accounts must balance, and the only way we can finance our trade deficit is through FDI in our economy. If we find ourselves unable to generate enough wealth, or attract enough investment, to import the things we want, that’s indeed an indictment of our ability to compete, but it likely has much more to do with government policy and regulation than with the work ethic of most Americans.
Obama’s statement that this pattern existed over “the last couple of decades,” is, I think, an attempt to include Bill Clinton’s presidency in his criticism, a back-handed return volley to Clinton’s oblique criticisms of Obama’s economic policies. It’s more than just his routine scolding of his fellow citizens, it also contains a domestic partisan political component, as well. One wants to resist the temptation to overstate the electoral consequences of such tension. But it may be that the President’s famously thin skin is once again getting the better of his judgment.
At this rate, maybe his staff should just use that XtraNorml animation engine for any future “scripted conversations.”
