Someone suggested recently that extensive foreign ownership of British industry and utilities does not matter. I disagree, but am prepared here, for the sake of brevity, to accept that ownership by foreign commercial companies operating out of a democracy is not a critical problem. Rather than debate that matter, I wish to focus on a form of foreign ownership which can indeed be a serious problem, should Britain be subjected to it.
I mentioned yesterday (Straws in the Wind) that in the western form of capitalism, those with economic interest act in politics to pursue their commercial objectives, and that state capitalism reverses this process. There, those with political objectives act on the economy in pursuit of their political aims. Therein lies a danger.
A number of countries, most notably, but not exclusively, China are running up huge foreign reserve funds through their trade surpluses. In many cases, those funds are then siphoned into a government controlled bank and used to build Sovereign Wealth Funds. Those funds are then used in turn, sometimes through a nominally commercial company, to invest in acquiring foreign assets. Such investment may not have a commercial rationale, but be more the result of geopolitical aims of the government.
So, if one can be sanguine about foreign commercial companies owning British assets, perhaps a little more concern is called for if those companies are too close to their domestic government, and may, under political pressure, use ownership as a lever to influence Westminster. Certainly, concern is now being expressed in America.
Boadicea's Chariot 
Tom, the “geopolitical aims of …. government…” are apparent in the biz activities of both the western and eastern powers – no always overtly of course. Unlike Sipu I’m not prepared to support China v. the US of A in this respect; their motives appear to be identical and their methods not dissimilar.
I recollect the concerns raised by the British Government of the day, over the Kuwait Fund’s purchase of a relatively large chunk of BP’s stock. From memory, they were forced to dispose of much of their holding. It made sense to the Kuwaitis, as investor, to aim for vertical intergration of their mineral wealth. I believe the Q8 fuel distribution chain is owned by them, as part of this process. Many countries who see their banks as strategically important, will not permit foreign ownerhship beyond 49% and severely restirct the activities of foreign banks in their domestic markets.
In the case of China, their reserve holdings of dollars seems to me to be a double-edged sword. It’s akin to the analogy, I owe the bank a small amount of money – that’s my problem. I owe the bank a huge amount of money – that’s the bank’s problem. It is not in China’s interests to see the dollar fail, when they hold so many of them. But it is not unreasonable to expect them to make strategic foreign investments with their vast foreign holdings, is it? After all, the OPEC surpluses of Saudi Arabia, Kuwait, Brunei, Qatar, and Oman, have been invested in western technology and manufacturing for decades, to build up their “Funds for Future Generations”.
CWJ, I didn’t suggest that it was unreasonable from the foreigners’ point of view, simply that it could be risky to allow too much of it in, especially in certain key areas.
Janus, I accept what you say, except that I do not see an American government having the kind of control over its overseas investors that the Chinese government has.
Tom, do you not think that its not just ownership of assets but trade and other factors as well that govern foreign policy? The US’s attitude to China is very different say to its attitude to Iraq or Zimbabwe and yet all three were/are guilty of horrendous human rights abuse. At least 3 reasons are that 1) China is too powerful militarily, 2) China is too big a trading partner 3) China holds too much US debt. Saudi Arabia, which is also guilty of human rights abuse does not have to own Boeing or BAe to gain influence in Washington and Whitehall. It just has to purchase huge amounts of military hardware from those companies.
Janus, its not that I support China, its just that I think the US is and always has been excessively self-interested. Its political, military, social and economic philosophy has always been about what is best for the US. Perhaps that is what one would expect, but its leaders should not pretend that they are striving for a global egalitarian society when they have no desire and no intention of achieving that. Or maybe they should pretend, but we should not believe them and it amazes me that so many people do.
Most of the wealth that Britain built up via its centuries of economic dominance was lost to the Americans at the outset of WW2. Prior to the implementation of Lend Lease, the US made Britain pay through the nose for its weapons and supplies, by forcing her to sell gold and overseas assets at knock down prices. If Britain had no assets, maybe the US would have helped her for free, like it did the USSR.
I agree that Britain needs to be careful about what assets it allows to fall into foreign hands. But at the same time I certainly see the rational for the building sovereign wealth funds. If you have got excess money, it is wise to diversify your investments. In the end, everything has a price. Britain’s airports are only valuable to their Spanish owners as long as Britain’s economy is thriving.
I understand what you mean.
I suspect there is an element of the boot being on the other foot for a change – when you consider the expansion and exploitation of the mineral wealth of Africa and the rest of the less developed world by the Tiny Rowlands and De Beers empires, and the financial tentacles of the predominantly British international banks in the last half of the 20th century – I refer to banks like Barclays DCO (Dominion, Colonial and Overseas, in case anyone didn’t know what those initials stood for!), Chartered Bank, The British Bank o the Middle East, Hongkong and Shanghai Bank, National and Grindlays Bank, and the Citibanks and American Expresses which followed the British into the Third World. Most of them had strong representation in over 60 different countries, and in many acted as the country’s Central Bank, before central banks were established. In many countries they helped to establish the financial stability of the economies, making very handsome profits in the process for the UK.
I can see not wanting strategically important utilities and manufacturing – our Arms industry, for instance – owned by the Iranians, for example, but we seem to have already sold our water and electricity Utilities to the French! I wish they would buy our rail networks and give us the Bullet Train, or is that the Japanese?
CWJ, the Bullet Train is Japanese, the French fast train is the TGV. I wish the French would buy the NHS, and bring it up to a decent standard. I understand that it is now the Chinese who are buying up African resources.
Sipu, you are right to point to trade, which has always been used for gaining advantage, and it is clear that only the small beer can be pushed around. That is life, sadly.