Why has the easy flow of international capital caused difficulties for the U.S. economy?
What will be an ideal response?
There are a variety of problems that have arisen for the United States as a consequence of the easy flow of international capital. First as money has flowed into the United States, a number of businesses and a large amount of property are now owned by entities and individuals outside of the country. The dependency on foreign capital makes some important industries seemingly difficult to steer toward national policy goals. Secondly, the ease with which capital now moves impedes the ability of the United States to make domestic economic policy as it might like, as businesses outside the country can have a large impact on the economy. Further, international businesses can bargain over where to locate, that is, try to gain economic advantages with the possibility of bring the business into the United States. Third, the strength of the dollar has been a bit of a disadvantage in that American products are more expensive abroad than products made elsewhere. Since the dollar is stronger than it possibly should be, U.S. products are more difficult to sell, thereby, increasing the United States negative balance of trade.
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