The New York Times mission has long been to publish “All the news that’s fit to print.”  But these days, the following coda is needed: “as long as it doesn’t make us look like ignoramuses.”  How else to explain the unreceptive reaction of the Times’ Sunday Business editors to evidence showing glaring omissions in reporter Micheline Maynard’s big October 18 front page feature on the impact of foreign direct investment in the United States?

Maynard’s article – drawn from her new book on the same subject – portrayed foreign takeovers of U.S. companies as “A Lifeline [for the U.S. economy] Not Made in the U.S.A."  According to the piece, "foreign employers could help revive the economy."  Moreover, if the jobs they support "did not exist, the nation’s unemployment rate would be above 13 percent."  Too bad for trusting readers that her evidence was overwhelmingly anecdotal, and that she ignored the reams of easily available U.S. government and scholarly data painting an entirely different picture.

First, as the GLOBALIZATION FOLLIES crew told the Sunday business editors the following day (to no avail),  U.S. government statistics show that, since at least the early 1990s, some 90 percent of such foreign direct investment in the United States has been spent on acquiring existing businesses, not on creating new ones. And there is no evidence that foreign investors prefer failing enterprises, as opposed to strong companies with bright futures.

Second, apparently the editors were not interested in the fact that, as with most purely domestic transactions, foreign acquisitions of U.S. assets seek to squeeze greater efficiencies out of the target firm, or to eliminate redundancies between the acquiring firm and the target firm, by reducing staff.   Classic examples are the takeover of IBM’s personal computer division by the Chinese computer firm Lenovo in 2005 and French telecommunications company Alcatel’s acquisition of its American counterpart Lucent in 2006.  

Third, it’s obvious that, over time, most acquiring companies (whether foreign-owned or not) hope to create enough new value to justify net new hiring.  (Short-term-oriented turnaround investors are a limited exception.)  Unfortunately, the Times editors seemed completely unimpressed to learn about the clear consensus of academic research – hopes for net value creation generally are in vain, because most mergers and acquisitions of all kinds fail this test.  

Maynard’s book title is even more enthusiastic than her article title:  “The Selling of the American Economy: How Foreign Companies Are Remaking the American Dream.”  Judging from the latter, however, the only dreams that interest Maynard and her editors are pipe dreams.

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